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Notice2022-03965

Self-Regulatory Organizations; MIAX PEARL LLC; Notice of Filing of a Proposed Rule Change To Amend the MIAX PEARL Options Fee Schedule To Remove Certain Credits and Increase Trading Permit Fees; Suspension of and Order Instituting Proceedings To Determine Whether To Approve or Disapprove the Proposed Rule Change

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Published

February 25, 2022

Issuing agencies

Securities and Exchange Commission

Full Text

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<title>Federal Register, Volume 87 Issue 38 (Friday, February 25, 2022)</title>
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[Federal Register Volume 87, Number 38 (Friday, February 25, 2022)]
[Notices]
[Pages 10837-10856]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-03965]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94287; File No. SR-PEARL-2022-05]

Self-Regulatory Organizations; MIAX PEARL LLC; Notice of Filing
of a Proposed Rule Change To Amend the MIAX PEARL Options Fee Schedule
To Remove Certain Credits and Increase Trading Permit Fees; Suspension
of and Order Instituting Proceedings To Determine Whether To Approve or
Disapprove the Proposed Rule Change

February 18, 2022.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on February 15, 2022, MIAX PEARL, LLC (``MIAX Pearl'' or ``Exchange'')
filed with the Securities and Exchange Commission (``Commission'') a
proposed rule change as described in Items I and II below, which Items
have been prepared by the Exchange. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons and is, pursuant to Section 19(b)(3)(C) of the Act, hereby: (i)
Temporarily suspending the rule change; and (ii) instituting
proceedings to determine whether to approve or disapprove the proposed
rule change.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

The Exchange is filing a proposal to amend the MIAX Pearl Options
Fee Schedule (the ``Fee Schedule'') to remove certain credits and amend
the monthly Trading Permit \3\ fees for Exchange Members.\4\
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\3\ The term ``Trading Permit'' means a permit issued by the
Exchange that confers the ability to transact on the Exchange. See
Exchange Rule 100.
\4\ The term ``Member'' means an individual or organization that
is registered with the Exchange pursuant to Chapter II of Exchange
Rules for purposes of trading on the Exchange as an ``Electronic
Exchange Member'' or ``Market Maker.'' Members are deemed
``members'' under the Exchange Act. See Exchange Rule 100 and the
Definitions Section of the Fee Schedule.
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The text of the proposed rule change is available on the Exchange's
website at <a href="http://www.miaxoptions.com/rule-filings/pearl">http://www.miaxoptions.com/rule-filings/pearl</a> at MIAX
Pearl's principal office, and at the Commission's Public Reference
Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV [sic] below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

1. Purpose
The Exchange proposes to amend the Fee Schedule to remove certain
credits and amend the monthly Trading Permit fees (the ``Proposed
Access Fees'') for Exchange Members. The Exchange initially filed this
proposal on July 1, 2021, with the proposed fee changes being
immediately effective (``First Proposed Rule Change'').\5\ The First
Proposed Rule Change was published for comment in the Federal Register
on July 15, 2021.\6\ The Commission received one comment letter on the
First Proposed Rule Change \7\ and subsequently suspended the Frist
[sic] Proposed Rule Change on August 27, 2021.\8\ The Exchange withdrew
First Proposed Rule Change on October 12, 2021 and re-submitted the
proposal on October 29, 2021, with the proposed fee changes being
effective beginning November 1, 2021 (``Second Proposed Rule
Change'').\9\ The Second Proposed Rule Change provided additional
justification for the proposed fee changes and addressed certain points
raised in the single comment letter that was submitted on the First
Proposed Rule Change. The Second Proposed Rule Change was published for
comment in the Federal Register on November 17, 2021.\10\ The
Commission received no comment letters on the Second Proposed Rule
Change. Nonetheless, the Exchange withdrew the Second Proposed Rule
Change on December 20, 2021 and submitted a revised proposal for
immediate effectiveness (``Third Proposed Rule Change'').\11\ The Third
Proposed Rule Change was published for comment in the Federal Register
on January 10, 2022.\12\ The Third Proposed Rule Change meaningfully
attempted to provide additional justification and explanation for the
proposed fee changes, directly respond to the points raised in the
single comment letter submitted on the First Proposed Rule Change, and
respond to feedback provided by Commission Staff during a telephone
conversation on November 18, 2021 relating to the Second Proposed Rule
Change. Although the Commission again did not receive any comment
letters on the Third Proposed

[[Page 10838]]

Rule Change, the Exchange withdrew the Third Proposed Rule Change on
February 15, 2022 and now submits this revised proposal for immediate
effectiveness (``Fourth Proposed Rule Change''). This Fourth Proposed
Rule Change provides additional justification and explanation for the
proposed fee changes.
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\5\ See Securities Exchange Act Release No. 92366 (July 9,
2021), 86 FR 37379 (SR-PEARL-2021-32).
\6\ See id.
\7\ See Letter from Richard J. McDonald, Susquehanna
International Group, LLC (``SIG''), to Vanessa Countryman,
Secretary, Commission, dated September 28, 2021 (``SIG Letter'').
\8\ See Securities Exchange Act Release No. 92797 (August 27,
2021), 86 FR 49399 (September 2, 2021).
\9\ See Securities Exchange Act Release No. 93555 (November 10,
2021), 86 FR 64254 (November 17, 2021) (SR-PEARL-2021-54).
\10\ See id.
\11\ Securities Exchange Act Release No. 93895 (January 4,
2022), 87 FR 1217 (January 10, 2022) (SR-PEARL-2021-59).
\12\ Id.
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Removal of the ``Monthly Volume Credit''
The Exchange proposes to amend the Definitions section of the Fee
Schedule to delete the definition and remove the credits applicable to
the Monthly Volume Credit for Members. The Exchange established the
Monthly Volume Credit in 2018 \13\ to encourage Members to send
increased Priority Customer \14\ order flow to the Exchange, which the
Exchange applied to the assessment of certain non-transaction rebates
and fees for that Member. The Exchange applies a different Monthly
Volume Credit depending on whether the Member connects to the Exchange
via the FIX Interface \15\ or MEO Interface.\16\ Currently, the
Exchange assesses the Monthly Volume Credit to each Member that has
executed Priority Customer volume along with that of its
Affiliates,\17\ not including Excluded Contracts,\18\ of at least 0.30%
of MIAX Pearl-listed Total Consolidated Volume (``TCV''),\19\ as set
forth in the following table:
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\13\ See Securities Exchange Act Release No. 82867 (March 13,
2018), 83 FR 12044 (March 19, 2018) (SR-PEARL-2018-07).
\14\ The term ``Priority Customer'' means a person or entity
that (i) is not a broker or dealer in securities, and (ii) does not
place more than 390 orders in listed options per day on average
during a calendar month for its own beneficial accounts(s). The
number of orders shall be counted in accordance with Interpretation
and Policy .01 of Exchange Rule 100. See the Definitions Section of
the Fee Schedule and Exchange Rule 100, including Interpretation and
Policy .01.
\15\ The term ``FIX Interface'' means the Financial Information
Exchange interface for certain order types as set forth in Exchange
Rule 516. See the Definitions Section of the Fee Schedule and
Exchange Rule 100.
\16\ The term ``MEO Interface'' or ``MEO'' means a binary order
interface for certain order types as set forth in Rule 516 into the
MIAX Pearl System. See the Definitions Section of the Fee Schedule
and Exchange Rule 100.
\17\ ``Affiliate'' means (i) an affiliate of a Member of at
least 75% common ownership between the firms as reflected on each
firm's Form BD, Schedule A, or (ii) the Appointed Market Maker of an
Appointed EEM (or, conversely, the Appointed EEM of an Appointed
Market Maker). An ``Appointed Market Maker'' is a MIAX Pearl Market
Maker (who does not otherwise have a corporate affiliation based
upon common ownership with an EEM) that has been appointed by an EEM
and an ``Appointed EEM'' is an EEM (who does not otherwise have a
corporate affiliation based upon common ownership with a MIAX Pearl
Market Maker) that has been appointed by a MIAX Pearl Market Maker,
pursuant to the following process. A MIAX Pearl Market Maker
appoints an EEM and an EEM appoints a MIAX Pearl Market Maker, for
the purposes of the Fee Schedule, by each completing and sending an
executed Volume Aggregation Request Form by email to
<a href="/cdn-cgi/l/email-protection#e08d858d82859293888990a08d8981988f9094898f8e93ce838f8d"><span class="__cf_email__" data-cfemail="234e464e414651504b4a53634e4a425b4c53574a4c4d500d404c4e">[email&#160;protected]</span></a> no later than 2 business days prior to
the first business day of the month in which the designation is to
become effective. Transmittal of a validly completed and executed
form to the Exchange along with the Exchange's acknowledgement of
the effective designation to each of the Market Maker and EEM will
be viewed as acceptance of the appointment. The Exchange will only
recognize one designation per Member. A Member may make a
designation not more than once every 12 months (from the date of its
most recent designation), which designation shall remain in effect
unless or until the Exchange receives written notice submitted 2
business days prior to the first business day of the month from
either Member indicating that the appointment has been terminated.
Designations will become operative on the first business day of the
effective month and may not be terminated prior to the end of the
month. Execution data and reports will be provided to both parties.
See the Definitions Section of the Fee Schedule.
\18\ ``Excluded Contracts'' means any contracts routed to an
away market for execution. See the Definitions Section of the Fee
Schedule.
\19\ ``TCV'' means total consolidated volume calculated as the
total national volume in those classes listed on MIAX Pearl for the
month for which the fees apply, excluding consolidated volume
executed during the period of time in which the Exchange experiences
an Exchange System Disruption (solely in the option classes of the
affected Matching Engine). See the Definitions Section of the Fee
Schedule.

------------------------------------------------------------------------
Monthly
Type of member connection volume
credit
------------------------------------------------------------------------
Member that connects via the FIX Interface................... $250
Member that connects via the MEO Interface................... 1,000
------------------------------------------------------------------------

If a Member connects via both the MEO Interface and FIX Interface
and qualifies for the Monthly Volume Credit based upon its Priority
Customer volume, the greater Monthly Volume Credit shall apply to such
Member. Prior to the First Proposed Rule Change, the Monthly Volume
Credit was a single, once-per-month credit towards the aggregate
monthly total of non-transaction fees assessable to a Member.
Beginning with the First Proposed Rule Change, the Exchange
proposes to amend the Definitions section of the Fee Schedule to delete
the definition and remove the Monthly Volume Credit. The Exchange
established the Monthly Volume Credit when it first launched operations
to attract order flow by lowering the initial fixed cost for Members.
The Monthly Volume Credit has achieved its purpose and the Exchange
believes it is appropriate to remove this credit. The Exchange believes
that the Exchange's existing Priority Customer rebates and fees will
continue to allow the Exchange to remain highly competitive and
continue to attract order flow and maintain market share.
Removal of the Trading Permit Fee Credit
The Exchange proposes to amend Section (3)(b) of the Fee Schedule
to remove the Trading Permit fee credit that is denoted in footnote
``*'' below the Trading Permit fee table. Prior to the First Proposed
Rule Change, the Trading Permit fee credit was applicable to Members
that connect via both the MEO and FIX Interfaces. Members who connect
via both the MEO and FIX Interfaces are assessed the rates for both
types of Trading Permits, but these Members received a $100 monthly
credit towards the Trading Permit fees applicable to the MEO Interface
prior to the First Proposed Rule Change. The Exchange proposes to
remove the Trading Permit fee credit and delete footnote ``*'' from
Section (3)(b) of the Fee Schedule.
The Exchange established the Trading Permit fee credit when it
first launched operations to attract order flow and increase membership
by lowering the costs for Members that connect via both the MEO
Interface and FIX Interface. The Trading Permit fee credit has achieved
its purpose and the Exchange now believes that it is appropriate to
remove this credit in light of the current operating conditions and
membership population on the Exchange.
Amendment of Trading Permit Fees
The Exchange proposes to amend Section (3)(b) of the Fee Schedule
to increase the amount of the monthly Trading Permit fees. The Exchange
issues Trading Permits to Members who are either Electronic Exchange
Members \20\ (``EEMs'') or Market Makers.\21\ The Exchange assesses
Trading Permit fees based upon the monthly total volume executed by the
Member and its Affiliates on the Exchange across all origin types, not
including Excluded Contracts, as compared to the total TCV in all MIAX
Pearl-listed options. The Exchange adopted a tier-based fee structure
based

[[Page 10839]]

upon the volume-based tiers detailed in the definition of ``Non-
Transaction Fees Volume-Based Tiers'' \22\ in the Definitions section
of the Fee Schedule. The Exchange also assesses Trading Permit fees
based upon the type of interface used by the Member to connect to the
Exchange--the FIX Interface and/or the MEO Interface.
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\20\ The term ``Electronic Exchange Member'' or ``EEM'' means
the holder of a Trading Permit who is a Member representing as agent
Public Customer Orders or Non-Customer Orders on the Exchange and
those non-Market Maker Members conducting proprietary trading.
Electronic Exchange Members are deemed ``members'' under the
Exchange Act. See the Definitions Section of the Fee Schedule.
\21\ The term ``Market Maker'' or ``MM'' means a Member
registered with the Exchange for the purpose of making markets in
options contracts traded on the Exchange and that is vested with the
rights and responsibilities specified in Chapter VI of these Rules.
See the Definitions Section of the Fee Schedule.
\22\ See the Definitions Section of the Fee Schedule for the
monthly volume thresholds associated with each Tier.
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Current Trading Permit Fees. Prior to the First Proposed Rule
Change, each Member who connected to the System \23\ via the FIX
Interface was assessed the following monthly Trading Permit fees:
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\23\ The term ``System'' means the automated trading system used
by the Exchange for the trading of securities. See Exchange Rule
100.
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(i) If its volume falls within the parameters of Tier 1 of the Non-
Transaction Fees Volume-Based Tiers, or volume up to 0.30%, $250;
(ii) if its volume falls within the parameters of Tier 2 of the
Non-Transaction Fees Volume-Based Tiers, or volume above 0.30% up to
0.60%, $350; and
(iii) if its volume falls with the parameters of Tier 3 of the Non-
Transaction Fees Volume-Based Tiers, or volume above 0.60%, $450.
Prior to the First Proposed Rule Change, each Member who connected
to the System via the MEO Interface was assessed the following monthly
Trading Permit fees:
(i) If its volume falls within the parameters of Tier 1 of the Non-
Transaction Fees Volume-Based Tiers, or volume up to 0.30%, $300;
(ii) if its volume falls within the parameters of Tier 2 of the
Non-Transaction Fees Volume-Based Tiers, or volume above 0.30% up to
0.60%, $400; and
(iii) if its volume falls with the parameters of Tier 3 of the Non-
Transaction Fees Volume-Based Tiers, or volume above 0.60%, $500.
Proposed Trading Permit Fees. Since the First Proposed Rule Change,
the Exchange proposes to amend its Trading Permit fees as follows. Each
Member who connects to the System via the FIX Interface is assessed the
following monthly Trading Permit fees:
(i) If its volume falls within the parameters of Tier 1 of the Non-
Transaction Fees Volume-Based Tiers, $500;
(ii) if its volume falls within the parameters of Tier 2 of the
Non-Transaction Fees Volume-Based Tiers, $1,000; and
(iii) if its volume falls with the parameters of Tier 3 of the Non-
Transaction Fees Volume-Based Tiers, $1,500.
Each Member who connects to the System via the MEO Interface is
assessed the following monthly Trading Permit fees:
(i) If its volume falls within the parameters of Tier 1 of the Non-
Transaction Fees Volume-Based Tiers, $2,500;
(ii) if its volume falls within the parameters of Tier 2 of the
Non-Transaction Fees Volume-Based Tiers, $4,000; and
(iii) if its volume falls with the parameters of Tier 3 of the Non-
Transaction Fees Volume-Based Tiers, $6,000.
Members who use the MEO Interface may also connect to the System
through the FIX Interface as well, and vice versa. The Exchange notes
that the Trading Permit fees for Members who connect through the MEO
Interface are higher than the Trading Permit fees for Members who
connect through the FIX Interface, since the FIX Interface utilizes
less capacity and resources of the Exchange. The MEO Interface offers
lower latency and higher throughput, which utilizes greater capacity
and resources of the Exchange. The FIX Interface offers lower bandwidth
requirements and an industry-wide uniform message format. Both EEMs and
Market Makers may connect to the Exchange using either interface.
Trading Permits grant access to the Exchange, thus providing the
ability to submit orders and trade on the Exchange, in the manner
defined in the relevant Trading Permit. Without a Trading Permit, a
Member cannot directly trade on the Exchange. Therefore, a Trading
Permit is a means to directly access the Exchange (which offers
meaningful value), and the Exchange proposes to increase its monthly
fees since it had not done so since the fees were first adopted in 2018
\24\ and are designed to recover a portion of the costs associated with
directly accessing the Exchange. The Exchange notes that the its
affiliates, Miami International Securities Exchange, LLC (``MIAX'') and
MIAX Emerald, LLC (``MIAX Emerald''), charge a similar, fixed trading
permit fee to certain users, and a similar, varying trading permit fee
to other users, based upon the number of assignments of option classes
or the percentage of volume in option classes.\25\
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\24\ See supra note 13.
\25\ See the MIAX Fee Schedule, Section 3)b); MIAX Emerald Fee
Schedule, Section 3)b).
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As illustrated by the table below, the Exchange notes that the
proposed fees for the Exchange's Trading Permits are in line with, or
cheaper than, the similar trading permits and access fees for similar
membership fees charged by other options exchanges. The below table
also illustrates how the Exchange has historically undercharged for
access via Trading Permits as compared to other options exchanges. The
Exchange believes other exchanges' access and trading permit fees are
useful examples of alternative approaches to providing and charging for
access and provides the below table for comparison purposes only to
show how the Exchange's proposed fees compare to fees currently charged
by other options exchanges for similar access.

[[Page 10840]]

NYSE American, LLC (``NYSE ATP Trading $8,000 for up to 60 plus the bottom 45% of option issues.
American'') \27\. Permits. Additional $6,000 for up to 150 plus the bottom 45% of option
issues.
Additional $5,000 for up to 500 plus the bottom 45% of option
issues.
Additional $4,000 for up to 1,100 plus the bottom 45% of
option issues.
Additional $3,000 for all option issues.
Additional $2,000 for 6th to 9th ATPs (plus additional fee
for premium products).
Nasdaq PHLX LLC (``Nasdaq Streaming Quote Tier 1 (up to 200 option classes): $0.00.
PHLX'') \28\. Trader permit Tier 2 (up to 400 option classes): $2,200.
fees.
Tier 3 (up to 600 option classes): $3,200.
Tier 4 (up to 800 option classes): $4,200.
Tier 5 (up to 1,000 option classes): $5,200.
Tier 6 (up to 1,200 option classes): $6,200.
Tier 7 (all option classes): $7,200.
Remote Market Tier 1 (less than 100 option classes): $5,500.
Maker Tier 2 (more than 100 and less than 999 option classes):
Organization $8,000.
permit fees.
Tier 3 (1,000 or more option classes): $11,000.
Nasdaq ISE LLC (``Nasdaq Access Fees...... Primary Market Maker: $5,000 per membership.
ISE'') \29\. Competitive Market Maker: $2,500 per membership.
Cboe C2 Exchange, Inc. (``Cboe Access Permit Market Makers: $5,000.
C2'') \30\. Fees. Electronic Access Permits: $1,000.
----------------------------------------------------------------------------------------------------------------

Implementation
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\26\ NYSE Arca Options Fees and Charges, OTP Trading Participant
Rights, p.1.
\27\ NYSE American Options Fee Schedule, Section III, Monthly
Trading Permit, Rights, Floor Access and Premium Product Fees, p.
23-24.
\28\ Nasdaq PHLX Options 7 Pricing Schedule, Section 8.
Membership Fees.
\29\ Nasdaq ISE Options 7 Pricing Schedule, Section 8.A. Access
Services.
\30\ Cboe C2 Fee Schedule, Access Fees.
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The proposed fees are immediately effective.
2. Statutory Basis
The Exchange believes that its proposal to amend its Fee Schedule
is consistent with Section 6(b) of the Act \31\ in general, and
furthers the objectives of Section 6(b)(4) of the Act \32\ in
particular, in that it is an equitable allocation of reasonable dues,
fees and other charges among its members and issuers and other persons
using its facilities. The Exchange also believes the proposal furthers
the objectives of Section 6(b)(5) of the Act in that it is designed to
promote just and equitable principles of trade, to remove impediments
to and perfect the mechanism of a free and open market and a national
market system, and, in general to protect investors and the public
interest and is not designed to permit unfair discrimination between
customers, issuers, brokers and dealers.
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\31\ 15 U.S.C. 78f(b).
\32\ 15 U.S.C. 78f(b)(4) and (5).
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Removal of Monthly Volume Credit and Trading Permit Fee Credit
The Exchange believes its proposal to remove the Monthly Volume
Credit is reasonable, equitable and not unfairly discriminatory because
all market participants will no longer be offered the ability to
achieve the extra credits associated with the Monthly Volume Credit for
submitting Priority Customer volume to the Exchange and access to the
Exchange is offered on terms that are not unfairly discriminatory. The
Exchange believes it is equitable and not unfairly discriminatory to
remove the Monthly Volume Credit from the Fee Schedule for business and
competitive reasons because, in order to attract order flow when the
Exchange first launched operations, the Exchange established the
Monthly Volume Credit to lower the initial fixed cost for Members. The
Exchange now believes that it is appropriate to remove this credit in
light of the current operating conditions and the current type and
amount of Priority Customer volume executed on the Exchange. The
Exchange believes that the Exchange's Priority Customer rebates and
fees will still allow the Exchange to remain highly competitive such
that the Exchange should continue to attract order flow and maintain
market share.
The Exchange believes its proposal to remove the Trading Permit fee
credit for Members that connect via both the MEO Interface and FIX
Interface is reasonable, equitable and not unfairly discriminatory
because all market participants will no longer be offered the ability
to receive the credit and access to the Exchange is offered on terms
that are not unfairly discriminatory. The Exchange believes it is
equitable and not unfairly discriminatory to remove the Trading Permit
fee credit for business and competitive reasons because, in order to
attract order flow and membership after the Exchange first launched
operations, the Exchange established the Trading Permit fee credit to
lower the costs for Members that connect via both the MEO Interface and
FIX Interface. The Exchange now believes that it is appropriate to
remove this credit in light of the current operating conditions and
membership on the Exchange.
Trading Permit Fee Increase
On March 29, 2019, the Commission issued an Order disapproving a
proposed fee change by the BOX Market LLC Options Facility to establish
connectivity fees for its BOX Network (the ``BOX Order'').\33\ On May
21, 2019, the Commission Staff issued guidance ``to assist the national
securities

[[Page 10841]]

exchanges and FINRA . . . in preparing Fee Filings that meet their
burden to demonstrate that proposed fees are consistent with the
requirements of the Securities Exchange Act.'' \34\ Based on both the
BOX Order and the Guidance, the Exchange believes that it has clearly
met its burden to demonstrate that the proposed fees are consistent
with the Act because they (i) are reasonable, equitably allocated, not
unfairly discriminatory, and not an undue burden on competition; (ii)
comply with the BOX Order and the Guidance; (iii) are supported by
evidence (including comprehensive revenue and cost data and analysis)
that they are fair and reasonable because they will not result in
excessive pricing or supra-competitive profit; and (iv) utilize a cost-
based justification framework that is substantially similar to a
framework previously used by the Exchange, and its affiliates MIAX and
MIAX Emerald, to adopt or amend non-transaction fees (including port
and connectivity fees) and market data fees.\35\
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\33\ See Securities Exchange Act Release No. 85459 (March 29,
2019), 84 FR 13363 (April 4, 2019) (SR-BOX-2018-24, SR-BOX-2018-37,
and SR-BOX-2019-04) (Order Disapproving Proposed Rule Changes to
Amend the Fee Schedule on the BOX Market LLC Options Facility to
Establish BOX Connectivity Fees for Participants and Non-
Participants Who Connect to the BOX Network).
\34\ See Staff Guidance on SRO Rule Filings Relating to Fees
(May 21, 2019), at <a href="https://www.sec.gov/tm/staff-guidance-sro-rule-filings-fees">https://www.sec.gov/tm/staff-guidance-sro-rule-filings-fees</a> (the ``Guidance'').
\35\ See Securities Exchange Act Release Nos. 91145 (February
17, 2021), 86 FR 11033 (February 23, 2021) (SR-EMERALD-2021-05)
(proposal to establish market data fees for MIAX Emerald ToM,
Administrative Information Subscriber feed, and MIAX Emerald Order
Feed); 90981 (January 25, 2021), 86 FR 7582 (January 29, 2021) (SR-
PEARL-2021-01) (proposal to increase connectivity fees); 91460
(April 2, 2021), 86 FR 18349 (SR-EMERALD-2021-11) (proposal to adopt
port fees, increase connectivity fees, and increase additional
limited service ports); 91033 (February 1, 2021), 86 FR 8455
(February 5, 2021) (SR-EMERALD-2021-03) (proposal to adopt trading
permit fees).
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The Proposed Access Fees Will Not Result in a Supra-Competitive Profit
The Exchange believes that exchanges, in setting fees of all types,
should meet very high standards of transparency to demonstrate why each
new fee or fee amendment meets the requirements of the Act that fees
are reasonable, equitably allocated, not unfairly discriminatory, and
not create an undue burden on competition among market participants.
The Exchange believes this high standard is especially important when
an exchange imposes various access fees for market participants to
access an exchange's marketplace. The Exchange deems the Trading Permit
fees to be access fees. It records these fees as part of its ``Access
Fees'' revenue in its financial statements.
In the Guidance, the Commission Staff stated that, ``[a]s an
initial step in assessing the reasonableness of a fee, staff considers
whether the fee is constrained by significant competitive forces.''
\36\ The Guidance further states that, `` . . . even where an SRO
cannot demonstrate, or does not assert, that significant competitive
forces constrain the fee at issue, a cost-based discussion may be an
alternative basis upon which to show consistency with the Exchange
Act.'' \37\ In the Guidance, the Commission Staff further states that,
``[i]f an SRO seeks to support its claims that a proposed fee is fair
and reasonable because it will permit recovery of the SRO's costs, or
will not result in excessive pricing or supracompetitive profit,
specific information, including quantitative information, should be
provided to support that argument.'' \38\ The Exchange does not assert
that the Proposed Access Fees are constrained by competitive forces.
Rather, the Exchange asserts that the Proposed Access Fees are
reasonable because they will permit recovery of the Exchange's costs in
providing access via Trading Permits and will not result in the
Exchange generating a supra-competitive profit.
---------------------------------------------------------------------------

\36\ See Guidance, supra note 34.
\37\ Id.
\38\ Id.
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The Guidance defines ``supra-competitive profit'' as ``profits that
exceed the profits that can be obtained in a competitive market.'' \39\
The Commission Staff further states in the Guidance that ``the SRO
should provide an analysis of the SRO's baseline revenues, costs, and
profitability (before the proposed fee change) and the SRO's expected
revenues, costs, and profitability (following the proposed fee change)
for the product or service in question.'' \40\ The Exchange provides
this analysis below.
---------------------------------------------------------------------------

\39\ Id.
\40\ Id.
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Based on this analysis, the Exchange believes the Proposed Access
Fees are reasonable and do not result in a ``supra-competitive'' \41\
profit. The Exchange believes that it is important to demonstrate that
these fees are based on its costs and reasonable business needs. The
Exchange believes the Proposed Access Fees will allow the Exchange to
offset expense the Exchange has and will incur, and that the Exchange
is providing sufficient transparency (as described below) into how the
Exchange determined to charge such fees. Accordingly, the Exchange is
providing an analysis of its revenues, costs, and profitability
associated with the Proposed Access Fees. This analysis includes
information regarding its methodology for determining the costs and
revenues associated with the Proposed Access Fees. As a result of this
analysis, the Exchange believes the Proposed Access Fees are fair and
reasonable as a form of cost recovery plus present the possibility of a
reasonable return for the Exchange's aggregate costs of offering
Trading Permit access to the Exchange.
---------------------------------------------------------------------------

\41\ Id.
---------------------------------------------------------------------------

The Proposed Access Fees are based on a cost-plus model. In
determining the appropriate fees to charge, the Exchange considered its
costs to provide the services associated with Trading Permits, using
what it believes to be a conservative methodology (i.e., that strictly
considers only those costs that are most clearly directly related to
the provision and maintenance of Trading Permits) to estimate such
costs,\42\ as well as the relative costs of providing and maintaining
Trading Permits, and set fees that are designed to cover its costs with
a limited return in excess of such costs. However, as discussed more
fully below, such fees may also result in the Exchange recouping less
than all of its costs of providing and maintaining the services
associated with Trading Permits because of the uncertainty of
forecasting subscriber decision making with respect to firms' needs and
the likely potential for increased costs to procure the third-party
services described below.
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\42\ For example, the Exchange only included the costs
associated with providing and supporting the access services
associated with the Proposed Access Fees and excluded from its cost
calculations any cost not directly associated with providing and
maintaining such services. Thus, the Exchange notes that this
methodology underestimates the total costs of providing and
maintaining the access services associated with the Proposed Access
Fees.
---------------------------------------------------------------------------

To determine the Exchange's costs to provide the access services
associated with the Proposed Access Fees, the Exchange conducted an
extensive cost review in which the Exchange analyzed nearly every
expense item in the Exchange's general expense ledger to determine
whether each such expense relates to the Proposed Access Fees, and, if
such expense did so relate, what portion (or percentage) of such
expense actually supports the access services. The sum of all such
portions of expenses represents the total cost of the Exchange to
provide the access services associated with the Proposed Access Fees.
The Exchange also provides detailed information regarding the
Exchange's cost allocation methodology--namely, information that
explains the Exchange's rationale for determining that it was
reasonable to allocate certain expenses described in this filing

[[Page 10842]]

towards the cost to the Exchange to provide the access services
associated with the Proposed Access Fees. The Exchange conducted a
thorough internal analysis to determine the portion (or percentage) of
each expense to allocate to the support of access services associated
with the Proposed Access Fees. This analysis included discussions with
each Exchange department head to determine the expenses that support
access services associated with the Proposed Access Fees. This included
numerous meetings between the Exchange's Chief Information Officer,
Chief Financial Officer, Head of Strategic Planning and Operations,
Chief Technology Officer, various members of the Legal Department, and
other group leaders. The Exchange reviewed each individual expense to
determine if such expense was related to the proposed fees. Once the
expenses were identified, the Exchange department heads, with the
assistance of the Exchange's internal finance department, reviewed such
expenses holistically on an Exchange-wide level to determine what
portion of that expense supports providing access services for the
Proposed Access Fees. The sum of all such portions of expenses
represents the total cost to the Exchange to provide access services
associated with the Proposed Access Fees. For the avoidance of doubt,
no expense amount was allocated twice.
The internal cost analysis conducted by the Exchange is a
proprietary process that is designed to make a fair and reasonable
assessment of costs and resources allocated to support the provision of
services associated with the proposed fees. The Exchange acknowledges
that this assessment can only capture a moment in time and that costs
and resource allocations may change. That is why the Exchange has
historically, and on an ongoing basis, periodically revisits its costs
and resource allocations to ensure it is appropriately allocating
resources to properly provide services to the Exchange's constituents.
Any requirement that an exchange should conduct a periodic re-
evaluation on a set timeline of its cost justification and amend its
fees accordingly should be established by the Commission holistically,
applied to all exchanges and not just pending fee proposals such as
this filing. In order to be fairly applied, such a mandate should be
applied to existing market data fees as well.
In accordance with the Guidance, the Exchange has provided
sufficient detail to support a finding that the proposed fees are
consistent with the Exchange Act. The proposal includes a detailed
description of the Exchange's costs and how the Exchange determined to
allocate those costs related to the proposed fees. In fact, the detail
and analysis provided in this proposed rule change far exceed the level
of disclosure provided in other exchange fee filings that have not been
suspended by the Commission during its 60-day suspension period. A
Commission determination that it is unable to make a finding that this
proposed rule change is consistent with the Exchange Act would run
contrary to the Commission Staff's treatment of other recent exchange
fee proposals that have not been suspended and remain in effect
today.\43\ For example, a proposed fee filing that closely resembles
the Exchange's current filing was submitted in 2020 by the Cboe
Exchange, Inc. (``Cboe'') and increased fees for Cboe's 10Gb
connections, an access fee.\44\ This filing was submitted on September
2, 2020, nearly 15 months after the Staff's Guidance was issued. In
that filing, the Cboe stated that the ``proposed changes were not
designed with the objective to generate an overall increase in access
fee revenue.'' \45\ This filing provided no cost based data to support
its assertion that the proposal was intended to be revenue neutral.
Among other things, Cboe did not provide a description of the costs
underlying its provision of 10Gb connections to show that this
particular fee did not generate a supra-competitive profit or describe
how any potential profit may be offset by increased costs associated
with another fee included in its proposal. This filing, nonetheless,
was not suspended by the Commission and remains in effect today.
---------------------------------------------------------------------------

\43\ See, e.g., Securities Exchange Act Release Nos. 93293
(October 12, 2021), 86 FR 57716 (October 18, 2021) (SR-PHLX-2021-58)
(increasing several market data fees and adopting new market data
fee without providing a cost based justification); 91339 (March 17,
2021), 86 FR 15524 (March 23, 2021) (SR-CboeBZX-2021-020)
(increasing fees for a market data product while not providing a
cost based justification for the increase); 93293 (October 21,
2021), 86 FR 57716 (October 18, 2021) (SR-PHLX-2021-058) (increasing
fees for historical market data while not providing a cost based
justification for the increase); 92970 (September 14, 2021), 86 FR
52261 (September 20, 2021) (SR-CboeBZX-2021-047) (adopting fees for
a market data related product while not providing a cost based
justification for the fees); and 89826 (September 10, 2021), 85 FR
57900 (September 16, 2021) (SR-CBOE-2020-086) (increasing
connectivity fees without including a cost based justification).
\44\ See Securities Exchange Act Release No. 89826 (September
10, 2020), 85 FR 57900 (September 16, 2020) (SR-CBOE-2020-086)
(increasing connectivity fees without including a cost based
justification).
\45\ See id. at 57909.
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The Exchange notes that the Investors Exchange, Inc. (``IEX'')
recently submitted a proposed rule change to adopt fees for two real-
time proprietary market data feeds, TOPS and DEEP (``IEX Fee
Proposal''). IEX previously provided its TOP and DEEP market data feeds
for free and proposed to adopt modest, below market fees. The IEX Fee
Proposal included a detailed subscriber data and cost-based analysis in
compliance with the Guidance. Nonetheless, on December 30, 2021, the
Commission suspended the IEX Fee Proposal and instituted proceedings to
determine whether to approve or disapprove the IEX Fee Proposal.\46\
---------------------------------------------------------------------------

\46\ See Securities Exchange Act Release No. 93883 (December 30,
2021), 87 FR 523 (January 5, 2021) (SR-IEX-2021-14) (the ``IEX
Order'').
---------------------------------------------------------------------------

The Commission received three comment letters on the IEX Order.\47\
The Virtu Letter and HMA Letter 2 specifically applaud the amount of
detail included in the IEX Fee Proposal. Specifically, the Virtu Letter
states that ``[i]n significant detail, IEX provides data about three
cost components: `(1) direct costs, such as servers, infrastructure,
and monitoring; (2) enhancement initiative costs (e.g., new
functionality for IEX Data and increased capacity for the proprietary
market data feeds . . . ); and (3) personnel costs.' '' \48\ HMA Letter
2 similarly commends the level of detail included in the IEX Fee
Proposal and also highlights the disparate treatment by Commission
Staff of exchange fee filings.\49\ HMA Letter 2 provides three examples
to support this assertion.\50\ The Nasdaq Letter urges the

[[Page 10843]]

Commission to approve the IEX Fee Proposal promptly and raises concern
the questions asked by the Commission in the IEX Order imply that they
are exercising rate making authority that they clearly do not possess.
The Nasdaq Letter states that ``[i]f the Commission believes it has
authority to conduct cost-plus ratemaking, the Administrative Procedure
Act dictates that it must propose a rule for notice and comment and
that its final rule must be prepared to withstand judicial scrutiny.''
\51\ The Exchange agrees.
---------------------------------------------------------------------------

\47\ See letters to Ms. Venessa A. Countryman, Secretary,
Commission, from Douglas A. Cifu, Chief Executive Officer, Virtu
Financial, Inc., dated January 26, 2022 (the ``Virtu Letter''),
Tyler Gellasch, Executive Director, Healthy Markets Association
(``HMA''), dated January 26, 2022 (the ``HMA Letter 2''), and Erika
Moore, Vice President and Corporate Secretary, The Nasdaq Stock
Market LLC, dated January 27, 2022 (the ``Nasdaq Letter'').
\48\ See Virtu Letter at page 3, id.
\49\ HMA previously expressed their ``worry that the
Commission's process for reviewing and evaluating exchange filings
may be inconsistently applied.'' See letter from Tyler Gellasch,
Executive Director, HMA, to Hon. Gary Gensler, Chair, Commission,
dated October 29, 2021 (commenting on SR-CboeEDGA-2021-017, SR-
CboeBYX-2021-020, SR-Cboe-BZX-2021-047, SR-CboeEDGX-2021-030, SR-
MIAX-2021-41, SR-PEARL-2021-45, and SR-EMERALD-2021-29 and stating
that ``MIAX has repeatedly filed to change its connectivity fees in
a way that will materially lower costs for many users, while
increasing the costs for some of its heaviest of users. These
filings have been withdrawn and repeatedly refiled. Each time,
however, the filings contain significantly greater information about
who is impacted and how than other filings that have been permitted
to take effect without suspension'') (emphasis added) (``HMA Letter
1'').
\50\ See HMA Letter 2 at 2-3. The Exchange has provided further
examples to support HMA's assertion above. See supra note 39 and
accompanying text.
\51\ See Nasdaq Letter at page 13, id.
---------------------------------------------------------------------------

The Exchange believes exchanges, like all businesses, should be
provided flexibility when allocating costs and resources they deem
necessary to operate their business, including providing market data
and access services. The Exchange notes that costs and resource
allocations may vary from business to business and, likewise, costs and
resource allocations may differ from exchange to exchange when it comes
to providing market data and access services. It is a business decision
that must be evaluated by each exchange as to how to allocate internal
resources and what costs to incur internally or via third parties that
it may deem necessary to support its business and its provision of
market data and access services to market participants. An exchange's
costs may also vary based on fees charged by third parties and periodic
increases to those fees that may be outside of the control of an
exchange.
To determine the Exchange's projected revenues associated with the
Proposed Access Fees in the instant filing, the Exchange analyzed the
number of Members currently utilizing Trading Permits, and, utilizing a
recent monthly billing cycle representative of 2021 monthly revenue,
extrapolated annualized revenue on a going-forward basis. The Exchange
does not believe it is appropriate to factor into its analysis
projected or estimated future revenue growth or decline for purposes of
these calculations, given the uncertainty of such projections due to
the continually changing access needs of market participants and
potential increase in internal and third party expenses. The Exchange
is presenting its revenue and expense associated with the Proposed
Access Fees in this filing in a manner that is consistent with how the
Exchange presents its revenue and expense in its Audited Unconsolidated
Financial Statements. The Exchange's most recent Audited Unconsolidated
Financial Statement is for 2020. However, since the revenue and expense
associated with the Proposed Access Fees were not in place in 2020 or
for the majority of 2021, the Exchange believes its 2020 Audited
Unconsolidated Financial Statement is not representative of its current
total annualized revenue and costs associated with the Proposed Access
Fees. Accordingly, the Exchange believes it is more appropriate to
analyze the Proposed Access Fees utilizing its 2021 revenue and costs,
as described herein, which utilize the same presentation methodology as
set forth in the Exchange's previously-issued Audited Unconsolidated
Financial Statements. Based on this analysis, the Exchange believes
that the Proposed Access Fees are fair and reasonable because they will
not result in excessive pricing or supra-competitive profit when
comparing the Exchange's total annual expense associated with providing
the services associated with the Proposed Access Fees versus the total
projected annual revenue the Exchange will collect for providing those
services. The Exchange notes that this is the same justification
process utilized by the Exchange's affiliate, MIAX Emerald, in a filing
recently noticed and not suspended by the Commission when MIAX Emerald
adopted trading permit fees.\52\
---------------------------------------------------------------------------

\52\ See Securities Exchange Act Release No. 91033 (February 1,
2021), 86 FR 8455 (February 5, 2021) (SR-EMERALD-2021-03) (Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend Its Fee Schedule To Adopt Monthly Trading Permit Fees)
(adopting tiered trading permit fee structure for Market Makers
ranging from $7,000 to $22,000 per month and flat fee of $1,500 per
month for EEMs).
---------------------------------------------------------------------------

As outlined in more detail below, the Exchange projects that the
final annualized expense for 2021 to provide the services associated
with Trading Permits to be approximately $844,741 per annum or an
average of $70,395 per month. The Exchange implemented the Proposed
Access Fees on July 1, 2021 in the First Proposed Rule Change. For June
2021, prior to the Proposed Access Fees, Members and non-Members
purchased a total of 48 Trading Permits, for which the Exchange charged
a total of $15,500. This resulted in a loss of $54,895 for that month
(a margin of -354%). For the month of November 2021, which includes the
Proposed Access Fees, Members and non-Members purchased a total of 47
Trading Permits,\53\ for which the Exchange charged a total of
approximately $93,500 for that month. This resulted in a profit of
$23,105 for that month, representing a profit margin of approximately
24%. The Exchange believes that the Proposed Access Fees are reasonable
because they are designed to approximately generate a modest profit
margin of 24% per-month.\54\ The Exchange cautions that this profit
margin is likely to fluctuate from month to month based on the
uncertainty of predicting how many Trading Permits may be purchased
from month to month as Members and non-Members are able to add and drop
permits at any time based on their own business decisions, which they
frequently do. This profit margin may also decrease due to the
significant inflationary pressure on capital items that the Exchange
needs to purchase to maintain the Exchange's technology and
systems.\55\ The Exchange has been subject to price increases upwards
of 30% during the past year on network equipment due to supply chain
shortages. This, in turn, results in higher overall costs for ongoing
system maintenance, but also to purchase the items necessary to ensure
ongoing system resiliency, performance, and determinism. These costs
are expected to continue to go up as the U.S. economy continues to
struggle with supply chain and inflation related issues.
---------------------------------------------------------------------------

\53\ The Exchange notes that one Member dropped one Trading
Permit between June 2021 and November 2021, as a result of the
Proposed Access Fees.
\54\ The Exchange notes that this profit margin differs from the
First and Second Proposed Rule Changes because the Exchange now has
the benefit of using a more recent billing cycle under the Proposed
Access Fees (November 2021) and comparing it to a baseline month
(June 2021) from before the Proposed Access Fees were in effect.
\55\ See ``Supply chain chaos is already hitting global growth.
And it's about to get worse'', by Holly Ellyatt, CNBC, available at
<a href="https://www.cnbc.com/2021/10/18/supply-chain-chaos-is-hitting-global-growth-and-could-get-worse.html">https://www.cnbc.com/2021/10/18/supply-chain-chaos-is-hitting-global-growth-and-could-get-worse.html</a> (October 18, 2021); and
``There will be things that people can't get, at Christmas, White
House warns'' by Jarrett Renshaw and Trevor Hunnicutt, Reuters,
available at <a href="https://www.reuters.com/world/us/americans-may-not-get-some-christmas-treats-white-house-officials-warn-2021-10-12/">https://www.reuters.com/world/us/americans-may-not-get-some-christmas-treats-white-house-officials-warn-2021-10-12/</a>
(October 12, 2021).
---------------------------------------------------------------------------

As mentioned above, the Exchange projects that the final annualized
expense for 2021 to provide the services associated with the Proposed
Access Fees to be approximately $844,741 per annum or an average of
$70,395 per month and that these costs are expected to increase not
only due to anticipated significant inflationary pressure, but also
periodic fee increases by third parties.\56\ The Exchange notes that
there

[[Page 10844]]

are material costs associated with providing the infrastructure and
headcount to fully-support access to the Exchange. The Exchange incurs
technology expense related to establishing and maintaining Information
Security services, enhanced network monitoring and customer reporting,
as well as Regulation SCI mandated processes, associated with its
network technology. While some of the expense is fixed, much of the
expense is not fixed, and thus increases the cost to the Exchange to
provide access services associated with the Proposed Access Fees. For
example, new Members to the Exchange may require the purchase of
additional hardware to support those Members as well as enhanced
monitoring and reporting of customer performance that the Exchange and
its affiliates provide. Further, as the total number of Members
increases, the Exchange and its affiliates may need to increase their
data center footprint and consume more power, resulting in increased
costs charged by their third-party data center provider. Accordingly,
the cost to the Exchange and its affiliates to provide access to its
Members is not fixed and indeed is likely to increase rather than
decrease over time. The Exchange believes the Proposed Access Fees are
a reasonable attempt to offset a portion of the costs to the Exchange
associated with providing access to its network infrastructure.
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\56\ For example, on October 20, 2021, ICE Data Services
announced a 3.5% price increase effective January 1, 2022 for most
services. The price increase by ICE Data Services includes their
SFTI network, which is relied on by a majority of market
participants, including the Exchange. See email from ICE Data
Services to the Exchange, dated October 20, 2021. The Exchange
further notes that on October 22, 2019, the Exchange was notified by
ICE Data Services that it was raising its fees charged to the
Exchange by approximately 11% for the SFTI network.
---------------------------------------------------------------------------

The Exchange only has four primary sources of revenue and cost
recovery mechanisms to fund all of its operations: Transaction fees,
access fees (which includes the Proposed Access Fees), regulatory fees,
and market data fees. Accordingly, the Exchange must cover all of its
expenses from these four primary sources of revenue and cost recovery
mechanisms. Until recently, the Exchange has operated at a cumulative
net annual loss since it launched operations in 2017.\57\ This is a
result of providing a low cost alternative to attract order flow and
encourage market participants to experience the high determinism and
resiliency of the Exchange's trading systems. To do so, the Exchange
chose to waive the fees for some non-transaction related services or
provide them at a very marginal cost, which was not profitable to the
Exchange. This resulted in the Exchange forgoing revenue it could have
generated from assessing higher fees.
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\57\ The Exchange has incurred a cumulative loss of $86 million
since its inception in 2017 to 2020, the last year for which the
Exchange's Form 1 data is available. See Exchange's Form 1/A,
Application for Registration or Exemption from Registration as a
National Securities Exchange, filed July 28, 2021, available at
<a href="https://www.sec.gov/Archives/edgar/vprr/2100/21000461.pdf">https://www.sec.gov/Archives/edgar/vprr/2100/21000461.pdf</a>.
---------------------------------------------------------------------------

The Exchange believes that the Proposed Access Fees are fair and
reasonable because they will not result in excessive pricing or supra-
competitive profit, when comparing the total annual expense that the
Exchange projects to incur in connection with providing these access
services versus the total annual revenue that the Exchange projects to
collect in connection with services associated with the Proposed Access
Fees. For 2021,\58\ the total annual expense for providing the access
services associated with the Proposed Access Fees for the Exchange is
projected to be approximately $844,741 or an average of $70,395 per
month. The $844,741 in projected total annual expense is comprised of
the following, all of which are directly related to the access services
associated with the Proposed Access Fees: (1) Third-party expense,
relating to fees paid by the Exchange to third-parties for certain
products and services; and (2) internal expense, relating to the
internal costs of the Exchange to provide the services associated with
the Proposed Access Fees.\59\ As noted above, the Exchange believes it
is more appropriate to analyze the Proposed Access Fees utilizing its
2021 revenue and costs, which utilize the same presentation methodology
as set forth in the Exchange's previously-issued Audited Unconsolidated
Financial Statements.\60\ The $844,741 in projected total annual
expense is directly related to the access services associated with the
Proposed Access Fees, and not any other product or service offered by
the Exchange. It does not include general costs of operating matching
systems and other trading technology, and no expense amount was
allocated twice.
---------------------------------------------------------------------------

\58\ The Exchange has not yet finalized its 2021 year end
results.
\59\ The percentage allocations used in this proposed rule
change may differ from past filings from the Exchange or its
affiliates due to, among other things, changes in expenses charged
by third-parties, adjustments to internal resource allocations, and
different system architecture of the Exchange as compared to its
affiliates.
\60\ For example, the Exchange previously noted that all third-
party expense described in its prior fee filing was contained in the
information technology and communication costs line item under the
section titled ``Operating Expenses Incurred Directly or Allocated
From Parent,'' in the Exchange's 2019 Form 1 Amendment containing
its financial statements for 2018. See Securities Exchange Act
Release No. 87876 (December 31, 2019), 85 FR 757 (January 7, 2020)
(SR-PEARL-2019-36). Accordingly, the third-party expense described
in this filing is attributed to the same line item for the
Exchange's 2021 Form 1 Amendment, which will be filed in 2022.
---------------------------------------------------------------------------

As discussed, the Exchange conducted an extensive cost review in
which the Exchange analyzed nearly every expense item in the Exchange's
general expense ledger (this includes over 150 separate and distinct
expense items) to determine whether each such expense relates to the
access services associated with the Proposed Access Fees, and, if such
expense did so relate, what portion (or percentage) of such expense
actually supports those services, and thus bears a relationship that
is, ``in nature and closeness,'' directly related to those services. In
performing this calculation, the Exchange considered other services and
to which the expense may be applied and how much of the expense is
directly or indirectly utilized in providing those other services. The
sum of all such portions of expenses represents the total cost of the
Exchange to provide access services associated with the Proposed Access
Fees.
External Expense Allocations
For 2021, total third-party expense, relating to fees paid by the
Exchange to third-parties for certain products and services for the
Exchange to be able to provide the access services associated with the
Proposed Access Fees, is projected to be $188,815. This includes, but
is not limited to, a portion of the fees paid to: (1) Equinix, for data
center services, for the primary, secondary, and disaster recovery
locations of the Exchange's trading system infrastructure; (2) Zayo
Group Holdings, Inc. (``Zayo'') for network services (fiber and
bandwidth products and services) linking the Exchange's office
locations in Princeton, New Jersey and Miami, Florida, to all data
center locations; (3) Secure Financial Transaction Infrastructure
(``SFTI''),\61\ which

[[Page 10845]]

supports connectivity and feeds for the entire U.S. options industry;
(4) various other services providers (including Thompson Reuters, NYSE,
Nasdaq, and Internap), which provide content, connectivity services,
and infrastructure services for critical components of options
connectivity and network services; and (5) various other hardware and
software providers (including Dell and Cisco, which support the
production environment in which Members connect to the network to
trade, receive market data, etc.).
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\61\ In fact, on October 20, 2021, ICE Data Services announced a
3.5% price increase effective January 1, 2022 for most services. The
price increase by ICE Data Services includes their SFTI network,
which is relied on by a majority of market participants, including
the Exchange. See email from ICE Data Services to the Exchange,
dated October 20, 2021. This fee increase by ICE data services,
while not subject to Commission review, has a material impact on
costs to exchanges and other market participants that provide
downstream access to other market participants. The Exchange notes
that on October 22, 2019, the Exchange was notified by ICE Data
Services that it was raising its fees charged to the Exchange by
approximately 11% for the SFTI network, without having to show that
such fee change complies with the Act by being reasonable, equitably
allocated, and not unfairly discriminatory. It is unfathomable to
the Exchange that, given the critical nature of the infrastructure
services provided by SFTI, that its fees are not required to be
rule-filed with the Commission pursuant to Section 19(b)(1) of the
Act and Rule 19b-4 thereunder. See 15 U.S.C. 78s(b)(1) and 17 CFR
240.19b-4, respectively.
---------------------------------------------------------------------------

For clarity, the Exchange took a conservative approach in
determining the expense and the percentage of that expense to be
allocated to the providing access services in connection with the
Proposed Access Fees. Only a portion of all fees paid to such third-
parties is included in the third-party expense herein, and no expense
amount is allocated twice. Accordingly, the Exchange does not allocate
its entire information technology and communication costs to the access
services associated with the Proposed Access Fees. This may result in
the Exchange under allocating an expense to the provision of access
services in connection with the Proposed Access Fees and such expenses
may actually be higher or increase above what the Exchange utilizes
within this proposal. Further, the Exchange notes that, with respect to
the MIAX Pearl expenses included herein, those expenses only cover the
MIAX Pearl options market; expenses associated with the MIAX Pearl
equities market are accounted for separately and are not included
within the scope of this filing. As noted above, the percentage
allocations used in this proposed rule change may differ from past
filings from the Exchange or its affiliates due to, among other things,
changes in expenses charged by third-parties, adjustments to internal
resource allocations, and different system architecture of the Exchange
as compared to its affiliates. Further, as part its ongoing assessment
of costs and expenses, the Exchange recently conducted a periodic
thorough review of its expenses and resource allocations which, in
turn, resulted in a revised percentage allocations in this filing.
Therefore, the percentage allocations used in this proposed rule change
may differ from past filings from the Exchange or its affiliates due
to, among other things, changes in expenses charged by third-parties,
adjustments to internal resource allocations, and different system
architecture of the Exchange as compared to its affiliates.
The Exchange believes it is reasonable to allocate such third-party
expense described above towards the total cost to the Exchange to
provide the access services associated with the Proposed Access Fees.
In particular, the Exchange believes it is reasonable to allocate the
identified portion of the Equinix expense because Equinix operates the
data centers (primary, secondary, and disaster recovery) that host the
Exchange's network infrastructure. This includes, among other things,
the necessary storage space, which continues to expand and increase in
cost, power to operate the network infrastructure, and cooling
apparatuses to ensure the Exchange's network infrastructure maintains
stability. Without these services from Equinix, the Exchange would not
be able to operate and support the network and provide the access
services associated with the Proposed Access Fees to its Members and
their customers. The Exchange did not allocate all of the Equinix
expense toward the cost of providing the access services associated
with the Proposed Access Fees, only that portion which the Exchange
identified as being specifically mapped to providing the access
services associated with the Proposed Access Fees. According to the
Exchange's calculations, it allocated approximately 8% of the total
applicable Equinix expense to providing the services associated with
the proposed fees. The Exchange believes this allocation is reasonable
because it represents the Exchange's actual cost to provide the access
services associated with the Proposed Access Fees, and not any other
service, as supported by its cost review.\62\
---------------------------------------------------------------------------

\62\ As noted above, the percentage allocations used in this
proposed rule change may differ from past filings from the Exchange
or its affiliates due to, among other things, changes in expenses
charged by third-parties, adjustments to internal resource
allocations, and different system architecture of the Exchange as
compared to its affiliates. Again, as part its ongoing assessment of
costs and expenses, the Exchange recently conducted a periodic
thorough review of its expenses and resource allocations which, in
turn, resulted in a revised percentage allocations in this filing.
---------------------------------------------------------------------------

The Exchange believes it is reasonable to allocate the identified
portion of the Zayo expense because Zayo provides the internet, fiber
and bandwidth connections with respect to the network, linking the
Exchange with its affiliates, MIAX and MIAX Emerald, as well as the
data center and disaster recovery locations. As such, all of the trade
data, including the billions of messages each day per exchange, flow
through Zayo's infrastructure over the Exchange's network. Without
these services from Zayo, the Exchange would not be able to operate and
support the network and provide the access services associated with the
Proposed Access Fees. The Exchange did not allocate all of the Zayo
expense toward the cost of providing the access services associated
with the Proposed Access Fees, only the portion which the Exchange
identified as being specifically mapped to providing the Proposed
Access Fees. According to the Exchange's calculations, it allocated
approximately 4% of the total applicable Zayo expense to providing the
services associated with the proposed fees. The Exchange believes this
allocation is reasonable because it represents the Exchange's actual
cost to provide the access services associated with the Proposed Access
Fees, and not any other service, as supported by its cost review.\63\
---------------------------------------------------------------------------

\63\ Id.
---------------------------------------------------------------------------

The Exchange believes it is reasonable to allocate the identified
portions of the SFTI expense and various other service providers'
(including Thompson Reuters, NYSE, Nasdaq, and Internap) expense
because those entities provide connectivity and feeds for the entire
U.S. options industry, as well as the content, connectivity services,
and infrastructure services for critical components of the network.
Without these services from SFTI and various other service providers,
the Exchange would not be able to operate and support the network and
provide access to its Members and their customers. The Exchange did not
allocate all of the SFTI and other service providers' expense toward
the cost of providing the access services associated with the Proposed
Access Fees, only the portions which the Exchange identified as being
specifically mapped to providing the access services associated with
the Proposed Access Fees. According to the Exchange's calculations, it
allocated approximately 3% of the total applicable SFTI and other
service providers' expense to providing the services associated with
the proposed fees. The Exchange believes this allocation is reasonable
because it represents the Exchange's actual cost to provide the access
services associated with the Proposed Access Fees.\64\
---------------------------------------------------------------------------

\64\ Id.
---------------------------------------------------------------------------

The Exchange believes it is reasonable to allocate the identified
portion of the other hardware and software provider expense because
this includes costs for dedicated hardware licenses for switches and
servers, as well as dedicated software licenses for security

[[Page 10846]]

monitoring and reporting across the network. Without this hardware and
software, the Exchange would not be able to operate and support the
network and provide access to its Members and their customers. The
Exchange did not allocate all of the hardware and software provider
expense toward the cost of providing the access services associated
with the Proposed Access Fees, only the portions which the Exchange
identified as being specifically mapped to providing the access
services associated with the Proposed Access Fees. According to the
Exchange's calculations, it allocated approximately 5% of the total
applicable hardware and software provider expense to providing the
services associated with the proposed fees. The Exchange believes this
allocation is reasonable because it represents the Exchange's actual
cost to provide the access services associated with the Proposed Access
Fees.\65\
---------------------------------------------------------------------------

\65\ Id.
---------------------------------------------------------------------------

Internal Expense Allocations
For 2021, total projected internal expenses relating to the
Exchange providing the access services associated with the Proposed
Access Fees, is projected to be $655,925. This includes, but is not
limited to, costs associated with: (1) Employee compensation and
benefits for full-time employees that support the access services
associated with the Proposed Access Fees, including staff in network
operations, trading operations, development, system operations,
business, as well as staff in general corporate departments (such as
legal, regulatory, and finance) that support those employees and
functions; (2) depreciation and amortization of hardware and software
used to provide the access services associated with the Proposed Access
Fees, including equipment, servers, cabling, purchased software and
internally developed software used in the production environment to
support the network for trading; and (3) occupancy costs for leased
office space for staff that provide the access services associated with
the Proposed Access Fees. The breakdown of these costs is more fully-
described below.
For clarity, and as stated above, the Exchange took a conservative
approach in determining the expense and the percentage of that expense
to be allocated to providing the access services in connection with the
Proposed Access Fees. Only a portion of all such internal expenses are
included in the internal expense herein, and no expense amount is
allocated twice. Accordingly, the Exchange does not allocate its entire
costs contained in those items to the access services associated with
the Proposed Access Fees. This may result in the Exchange under
allocating an expense to the provision of access services in connection
with the Proposed Access Fees and such expenses may actually be higher
or increase above what the Exchange utilizes within this proposal.
Further, as part its ongoing assessment of costs and expenses
(described above), the Exchange recently conducted a periodic thorough
review of its expenses and resource allocations which, in turn,
resulted in a revised percentage allocations in this filing.
The Exchange believes it is reasonable to allocate such internal
expense described above towards the total cost to the Exchange to
provide the access services associated with the Proposed Access Fees.
In particular, the Exchange's employee compensation and benefits
expense relating to providing the access services associated with the
Proposed Access Fees is projected to be $549,834, which is only a
portion of the $9,163,894 total projected expense for employee
compensation and benefits. The Exchange believes it is reasonable to
allocate the identified portion of such expense because this includes
the time spent by employees of several departments, including
Technology, Back Office, Systems Operations, Networking, Business
Strategy Development (who create the business requirement documents
that the Technology staff use to develop network features and
enhancements), Trade Operations, Finance (who provide billing and
accounting services relating to the network), and Legal (who provide
legal services relating to the network, such as rule filings and
various license agreements and other contracts). As part of the
extensive cost review conducted by the Exchange, the Exchange reviewed
the amount of time spent by each employee on matters relating to the
provision of access services associated with the Proposed Access Fees.
Without these employees, the Exchange would not be able to provide the
access services associated with the Proposed Access Fees to its Members
and their customers. The Exchange did not allocate all of the employee
compensation and benefits expense toward the cost of the access
services associated with the Proposed Access Fees, only the portions
which the Exchange identified as being specifically mapped to providing
the access services associated with the Proposed Access Fees. According
to the Exchange's calculations, it allocated approximately 6% of the
total applicable employee compensation and benefits expense to
providing the services associated with the proposed fees. The Exchange
believes this allocation is reasonable because it represents the
Exchange's actual cost to provide the access services associated with
the Proposed Access Fees, and not any other service, as supported by
its cost review.\66\
---------------------------------------------------------------------------

\66\ Id.
---------------------------------------------------------------------------

The Exchange's depreciation and amortization expense relating to
providing the access services associated with the Proposed Access Fees
is projected to be $66,316, which is only a portion of the $1,326,325
total projected expense for depreciation and amortization. The Exchange
believes it is reasonable to allocate the identified portion of such
expense because such expense includes the actual cost of the computer
equipment, such as dedicated servers, computers, laptops, monitors,
information security appliances and storage, and network switching
infrastructure equipment, including switches and taps that were
purchased to operate and support the network and provide the access
services associated with the Proposed Access Fees. Without this
equipment, the Exchange would not be able to operate the network and
provide the access services associated with the Proposed Access Fees to
its Members and their customers. The Exchange did not allocate all of
the depreciation and amortization expense toward the cost of providing
the access services associated with the Proposed Access Fees, only the
portion which the Exchange identified as being specifically mapped to
providing the access services associated with the Proposed Access Fees.
According to the Exchange's calculations, it allocated approximately 5%
of the total applicable depreciation and amortization expense to
providing the services associated with the proposed fees, as these
access services would not be possible without relying on such. The
Exchange believes this allocation is reasonable because it represents
the Exchange's actual cost to provide the access services associated
with the Proposed Access Fees, and not any other service, as supported
by its cost review.\67\
---------------------------------------------------------------------------

\67\ Id.
---------------------------------------------------------------------------

The Exchange's occupancy expense relating to providing the access
services associated with the Proposed Access Fees is projected to be
$39,775, which is only a portion of the $497,180 total projected
expense for occupancy. The Exchange believes it is reasonable to

[[Page 10847]]

allocate the identified portion of such expense because such expense
represents the portion of the Exchange's cost to rent and maintain a
physical location for the Exchange's staff who operate and support the
network, including providing the access services associated with the
Proposed Access Fees. This amount consists primarily of rent for the
Exchange's Princeton, New Jersey office, as well as various related
costs, such as physical security, property management fees, property
taxes, and utilities. The Exchange operates its Network Operations
Center (``NOC'') and Security Operations Center (``SOC'') from its
Princeton, New Jersey office location. A centralized office space is
required to house the staff that operates and supports the network. The
Exchange currently has approximately 200 employees. Approximately two-
thirds of the Exchange's staff are in the Technology department, and
the majority of those staff have some role in the operation and
performance of the access services associated with the proposed Trading
Permit fees. Without this office space, the Exchange would not be able
to operate and support the network and provide the access services
associated with the Proposed Access Fees to its Members and their
customers. Accordingly, the Exchange believes it is reasonable to
allocate the identified portion of its occupancy expense because such
amount represents the Exchange's actual cost to house the equipment and
personnel who operate and support the Exchange's network infrastructure
and the access services associated with the Proposed Access Fees. The
Exchange did not allocate all of the occupancy expense toward the cost
of providing the access services associated with the Proposed Access
Fees, only the portion which the Exchange identified as being
specifically mapped to operating and supporting the network. According
to the Exchange's calculations, it allocated approximately 8% of the
total applicable occupancy expense to providing the services associated
with the proposed fees. The Exchange believes this allocation is
reasonable because it represents the Exchange's cost to provide the
access services associated with the Proposed Access Fees, and not any
other service, as supported by its cost review.\68\
---------------------------------------------------------------------------

\68\ Id.
---------------------------------------------------------------------------

The Exchange notes that a material portion of its total overall
expense is allocated to the provision of access services (including
connectivity, ports, and trading permits). The Exchange believes this
is reasonable and in line, as the Exchange operates a technology-based
business that differentiates itself from its competitors based on its
trading systems that rely on access to a high performance network,
resulting in significant technology expense. Over two-thirds of
Exchange staff are technology-related employees. The majority of the
Exchange's expense is technology-based. As described above, the
Exchange has only four primary sources of fees to recover its costs,
thus the Exchange believes it is reasonable to allocate a material
portion of its total overall expense towards access fees.
Based on the above, the Exchange believes that its provision of
access services associated with the Proposed Access Fees will not
result in excessive pricing or supra-competitive profit. As described
above, the Exchange projects that the annualized expense for 2021 to
provide the services associated with Trading Permit to be approximately
$844,741 per annum or an average of $70,395 per month. The Exchange
implemented the Proposed Access Fees on July 1, 2021 in the First
Proposed Rule Change. For June 2021, prior to the Proposed Access Fees,
Members and non-Members purchased a total of 48 Trading Permits, for
which the Exchange charged a total of $15,500. This resulted in a loss
of $54,895 for that month (a margin of -354%). For the month of
November 2021, which includes the Proposed Access Fees, Members and
non-Members purchased a total of 47 Trading Permits,\69\ for which the
Exchange charged a total of approximately $93,500 for that month. This
resulted in a profit of $23,105 for that month, representing a profit
margin of approximately 24%. The Exchange believes that the Proposed
Access Fees are reasonable because they are designed to approximately
generate a modest profit margin of 24% per-month. The Exchange believes
this modest profit margin will allow it to continue to recoup its
expenses and continue to invest in its technology infrastructure.
Therefore, the Exchange also believes that this proposed profit margin
increase is reasonable because it represents a reasonable rate of
return.
---------------------------------------------------------------------------

\69\ The Exchange notes that one Member dropped one Trading
Permit between June 2021 and November 2021, as a result of the
Proposed Access Fees.
---------------------------------------------------------------------------

Again, the Exchange cautions that this profit margin is likely to
fluctuate from month to month based in the uncertainty of predicting
how many Trading Permits may be purchased from month to month as
Members and non-Members are free to add and drop permits at any time
based on their own business decisions. Notwithstanding that the revenue
(and profit margin) may vary from month to month due to changes in the
number of Trading Permits utilized and volume conducted on the
Exchange, as well as changes to the Exchange's expenses, the number of
Trading Permits utilized has not materially changed over previous
months. Consequently, the Exchange believes that the months it has used
as a baseline to perform its assessment are representative of
reasonably anticipated costs and expenses. This profit margin may also
decrease due to the significant inflationary pressure on capital items
that it needs to purchase to maintain the Exchange's technology and
systems.\70\ Accordingly, the Exchange believes its total projected
revenue for providing the access services associated with the Proposed
Access Fees will not result in excessive pricing or supra-competitive
profit.
---------------------------------------------------------------------------

\70\ See supra note 55.
---------------------------------------------------------------------------

The Exchange believes that conducting the above analysis on a per
month basis is reasonable as the revenue generated from access services
subject to the proposed fee generally remains static from month to
month. The Exchange also conducted the above analysis on a per month
basis to comply with the Guidance which requires a baseline analysis to
assist in determining whether the proposal generates a supra-
competitive profit. This monthly analysis was also provided in response
to comment received on prior submissions of this proposed rule change.
The Exchange reiterates that it only has four primary sources of
revenue and cost recovery mechanisms: Transaction fees, access fees,
regulatory fees, and market data fees. Accordingly, the Exchange must
cover all of its expenses from these four primary sources of revenue
and cost recovery mechanisms. As a result, each of these fees cannot be
``flat'' and cover only the expenses directly related to the fee that
is charged. The above revenue and associated profit margin therefore
are not solely intended to cover the costs associated with providing
services subject to the proposed fees.
The Exchange believes it is reasonable, equitable and not unfairly
discriminatory to allocate the respective percentages of each expense
category described above towards the total cost to the Exchange of
operating and supporting the network, including providing the access
services associated with the Proposed Access Fees because the Exchange
performed a line-by-line

[[Page 10848]]

item analysis of nearly every expense of the Exchange, and has
determined the expenses that directly relate to providing access to the
Exchange. Further, the Exchange notes that, without the specific third-
party and internal items listed above, the Exchange would not be able
to provide the access services associated with the Proposed Access Fees
to its Members and their customers. Each of these expense items,
including physical hardware, software, employee compensation and
benefits, occupancy costs, and the depreciation and amortization of
equipment, have been identified through a line-by-line item analysis to
be integral to providing access services. The Proposed Access Fees are
intended to recover the Exchange's costs of providing access to
Exchange Systems. Accordingly, the Exchange believes that the Proposed
Access Fees are fair and reasonable because they do not result in
excessive pricing or supra-competitive profit, when comparing the
actual costs to the Exchange versus the projected annual revenue from
the Proposed Access Fees.
The Proposed Tiered-Pricing Structure Is Not Unfairly Discriminatory
and Provides for the Equitable Allocation of Fees, Dues, and Other
Charges
The Exchange believes the proposed tiered-pricing structure is
reasonable, fair, equitable, and not unfairly discriminatory because it
is the model adopted by the Exchange when it launched operations for
its Trading Permit fees. Moreover, the tiered pricing structure for
Trading Permits is not a new proposal and has been in place since 2018,
well prior to the filing of the First Proposed Rule Change. The
proposed tiers of Trading Permit fees will continue to apply to all
Members and non-Members in the same manner based upon the monthly total
volume executed by a Member and its Affiliates on the Exchange across
all origin types, not including Excluded Contracts, as compared to the
TCV in all MIAX Pearl-listed options. Members and non-Members may
choose to purchase more than the one Trading Permit based on their own
business decisions and needs. All similarly situated Members and non-
Members would be subject to the same fees. The fees do not depend on
any distinction between Members and non-Members because they are solely
determined by the individual Members' or non-Members' business needs
and their impact on Exchange resources.
The proposed tiered-pricing structure is not unfairly
discriminatory and provides for the equitable allocation of fees, dues,
and other charges because it is designed to encourage Members and non-
Members to be more efficient and economical when determining how to
access the Exchange and the amount of the fees are based on the number
of Trading Permits utilized using the FIX and MEO Interfaces, in
addition to the amount of volume conducted on the Exchange. The
proposed tiered pricing structure should also enable the Exchange to
better monitor and provide access to the Exchange's network to ensure
sufficient capacity and headroom in the System.
The proposed tiered-pricing structure is not unfairly
discriminatory and provides for the equitable allocation of fees, dues,
and other charges because the amount of the fee is directly related to
the Member or non-Member's TCV resulting in higher fees for greater
TCV. The higher the volume, the greater pull on Exchange resources. The
Exchange's high performance network solutions and supporting
infrastructure (including employee support), provides unparalleled
system throughput and the capacity to handle approximately 10.7 million
order messages per second. On an average day, the Exchange handles over
approximately 2.7 billion total messages. However, in order to achieve
a consistent, premium network performance, the Exchange must build out
and maintain a network that has the capacity to handle the message rate
requirements of its most heavy network consumers. These billions of
messages per day consume the Exchange's resources and significantly
contribute to the overall expense for storage and network transport
capabilities.\71\
---------------------------------------------------------------------------

\71\ Over the period from April 2021 until September 2021, the
Exchange processed 3.15 billion messages via the FIX interface
(0.43% of total messages received). Over that same time period, the
Exchange processed 731.4 billion messages (99.57% of total messages
received) over the MEO interface. This marked difference between the
number of FIX and MEO messages processed, when mapped to servers,
software, storage, and networking results in a much higher
allocation of total capital and operational expense to support the
MEO interface. For one, the Exchange incurs greater expense in
maintaining the resilience of the MEO interface to ensure its
ongoing operation in accordance with Regulation SCI. Another, the
Exchange must purchase and expand its storage capacity to retain
these increased messages in compliance with its record keeping
obligations. The Exchange has also seen significant inflationary
pressure on capital items that it needs to purchase to maintain its
technology. The Exchange has seen pricing increases upwards of 30%
on network equipment due to supply chain shortages.
---------------------------------------------------------------------------

There are material costs associated with providing the
infrastructure and headcount to fully-support access to the Exchange.
The Exchange incurs technology expense related to establishing and
maintaining Information Security services, enhanced network monitoring
and customer reporting, as well as Regulation SCI mandated processes,
associated with its network technology. While some of the expense is
fixed, much of the expense is not fixed, and thus increases as the
services associated with the Proposed Access Fees increase. For
example, new Members to the Exchange may require the purchase of
additional hardware to support those Members as well as enhanced
monitoring and reporting of customer performance that the Exchange and
its affiliates provide. Further, as the total number of Members
increases, the Exchange and its affiliates may need to increase their
data center footprint and consume more power, resulting in increased
costs charged by their third-party data center provider. Accordingly,
the cost to the Exchange and its affiliates to provide access to its
Members is not fixed. The Exchange believes the Proposed Access Fees
are reasonable in order to offset a portion of the costs to the
Exchange associated with providing access to its network
infrastructure.
The Proposed Fees Are Reasonable When Compared to the Fees of Other
Options Exchanges With Similar Market Share
The Exchange does not have visibility into other equities
exchanges' costs to provide access or their fee markup over those
costs, and therefore cannot use other exchanges' membership and access
fees as a benchmark to determine a reasonable markup over the costs of
providing the services associated with the Proposed Access Fees.
Nevertheless, the Exchange believes the other exchanges' membership and
participation fees are a useful example of alternative approaches to
providing and charging for similar types of access. To that end, the
Exchange believes the proposed tiered-pricing structure for its Trading
Permits is reasonable because the proposed highest tier is still less
than or similar to fees charged for similar access provided by other
options exchanges with comparable market shares. The below table
further illustrates this comparison.

[[Page 10849]]

----------------------------------------------------------------------------------------------------------------
Type of
membership or
Exchange trading permit Monthly fee
fees
----------------------------------------------------------------------------------------------------------------
MIAX Pearl (as proposed)...... Trading Permit Tier 1: $500.
access via FIX
Interface.
Tier 2: $1,000.
Tier 3: $1,500.
Trading Permit Tier 1: $2,500.
access via MEO Tier 2: $4,000.
Interface. Tier 3: $6,000.
NYSE Arca \72\................ Options Trading $6,000 for up to 175 option issues.
Permits
(``OTP'').
Additional $5,000 for up to 350 option issues.
Additional $4,000 for up to 1,000 option issues.
Additional $3,000 for all option issues.
Additional $1,000 for the 5th OTP and each OTP thereafter.
NYSE American \73\............ ATP Trading $8,000 for up to 60 plus the bottom 45% of option issues.
Permits.
Additional $6,000 for up to 150 plus the bottom 45% of option
issues.
Additional $5,000 for up to 500 plus the bottom 45% of option
issues.
Additional $4,000 for up to 1,100 plus the bottom 45% of
option issues.
Additional $3,000 for all option issues.
Additional $2,000 for 6th to 9th ATPs (plus additional fee
for premium products).
Nasdaq PHLX \74\.............. Streaming Quote Tier 1 (up to 200 option classes): $0.00.
Trader permit
fees.
Tier 2 (up to 400 option classes): $2,200.
Tier 3 (up to 600 option classes): $3,200.
Tier 4 (up to 800 option classes): $4,200.
Tier 5 (up to 1,000 option classes): $5,200.
Tier 6 (up to 1,200 option classes): $6,200.
Tier 7 (all option classes): $7,200.
Remote Market Tier 1 (less than 100 option classes): $5,500.
Maker
Organization
permit fees.
Tier 2 (more than 100 and less than 999 option classes):
$8,000.
Tier 3 (1,000 or more option classes): $11,000.
Nasdaq ISE \75\............... Access Fees...... Primary Market Maker: $5,000 per membership.
Competitive Market Maker: $2,500 per membership.
Cboe C2 \76\.................. Access Permit Market Makers: $5,000.
Fees.
Electronic Access Permits: $1,000.
----------------------------------------------------------------------------------------------------------------

In each of the above cases, the Exchange's highest tiered Trading
Permit fee, as proposed, is similar to or less than the fees of
competing options exchanges with like market share for similar access.
Further, as described in more detail below, many competing exchanges
generate higher overall operating profit margins and higher ``access
fees'' than the Exchange, inclusive of the projected revenues
associated with the proposed fees. The Exchange believes that it
provides a premium network experience to its Members and non-Members
via a highly deterministic system, enhanced network monitoring and
customer reporting, and a superior network infrastructure than markets
with higher market shares and more expensive access fees. Each of the
membership, trading permit and participation fee rates in place at
competing options exchanges were filed with the Commission for
immediate effectiveness and remain in place today.
---------------------------------------------------------------------------

\72\ See supra note 26.
\73\ See supra note 27.
\74\ See supra note 28.
\75\ See supra note 29.
\76\ See supra note 30.
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act.
Intra-Market Competition
The Exchange believes that the Proposed Access Fees do not place
certain market participants at a relative disadvantage to other market
participants because the Proposed Access Fees do not favor certain
categories of market participants in a manner that would impose a
burden on competition; rather, the fee rates are designed in order to
provide objective criteria for users that connect via the MEO Interface
of different sizes and business models that best matches their activity
on the Exchange.
The Exchange believes the removal of the Monthly Volume Credit and
Trading Permit fee credit will not place certain market participants at
a relative disadvantage to other market participants because, in order
to attract order flow when the Exchange first launched operations, the
Exchange established these credits to lower the initial fixed cost for
Members. The Exchange now believes that it is appropriate to remove
this credit in light of the current operating conditions, including the
Exchange's overall membership and the current type and amount of volume
executed on the Exchange. The Exchange believes that the Exchange's
rebates and fees will still allow the Exchange to remain highly
competitive such that the Exchange should continue to attract order
flow and maintain market share.

[[Page 10850]]

Inter-Market Competition
The Exchange believes the Proposed Access Fees do not place an
undue burden on competition on other options exchanges that is not
necessary or appropriate. In particular, options market participants
are not forced to become members of all options exchanges. The Exchange
notes that it has far less Members as compared to the much greater
number of members at other options exchanges. There are a number of
large users that connect via the MEO Interface and broker-dealers that
are members of other options exchange but not Members of the Exchange.
The Exchange is also unaware of any assertion that its existing fee
levels or the Proposed Access Fees would somehow unduly impair its
competition with other options exchanges. To the contrary, if the fees
charged are deemed too high by market participants, they can simply
discontinue their membership with the Exchange.
The Exchange operates in a highly competitive market in which
market participants can readily favor one of the 15 competing options
venues if they deem fee levels at a particular venue to be excessive.
Based on publicly-available information, and excluding index-based
options, no single exchange has more than approximately 16% market
share. Therefore, no exchange possesses significant pricing power in
the execution of multiply-listed equity and ETF options order flow.
Over the course of 2021, the Exchange's market share has fluctuated
between approximately 3-6% of the U.S. equity options industry.\77\ The
Exchange is not aware of any evidence that a market share of
approximately 3-6% provides the Exchange with anti-competitive pricing
power. The Exchange believes that the ever-shifting market share among
exchanges from month to month demonstrates that market participants can
discontinue or reduce use of certain categories of products, or shift
order flow, in response to fee changes. In such an environment, the
Exchange must continually adjust its fees to remain competitive with
other exchanges and to attract order flow to the Exchange.
---------------------------------------------------------------------------

\77\ See ``The market at a glance,'' available at <a href="https://www.miaxoptions.com/">https://www.miaxoptions.com/</a> (last visited December 20, 2021).
---------------------------------------------------------------------------

Regrettably, the Exchange believes that the application of the
Guidance to date has adversely affected inter-market competition by
impeding the ability of smaller, low cost exchanges to adopt or
increase fees for their market data and access services (including
connectivity and port products and services). Since the adoption of the
Guidance, and even more so recently, it has become harder, particularly
for smaller, low cost exchanges, to adopt or increase fees to generate
revenue necessary to invest in systems, provide innovative trading
products and solutions, and improve competitive standing to the benefit
of the affected exchanges' market participants. Although the Guidance
has served an important policy goal of improving disclosures in
proposed rule changes and requiring exchanges to more clearly justify
that their market data and access fee proposals are fair and
reasonable, it has also been inconsistently applied and therefore
negatively impacted exchanges, and particularly many smaller, low cost
exchanges, that seek to adopt or increase fees despite providing
enhanced disclosures and rationale to support their proposed fee
changes.

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others

As described above, the Exchange received one comment letter on the
First Proposed Rule Change \78\ and no comment letters on the Second or
Third Proposed Rule Changes. The SIG Letter cites Rule 700(b)(3) of the
Commission's Rules of Fair Practice which places ``the burden to
demonstrate that a proposed rule change is consistent with the Act on
the self-regulatory organization that proposed the rule change'' and
states that a ``mere assertion that the proposed rule change is
consistent with those requirements . . . is not sufficient.'' \79\ The
SIG Letter's assertion that the Exchange has not met this burden is
without merit, especially considering the overwhelming amounts of
revenue and cost information the Exchange included in the First and
Second Proposed Rule Changes and this filing.
---------------------------------------------------------------------------

\78\ See supra note 7.
\79\ 17 CFR 201.700(b)(3).
---------------------------------------------------------------------------

Until recently, the Exchange has operated at a net annual loss
since it launched operations in 2017.\80\ As stated above, the Exchange
believes that exchanges in setting fees of all types should meet very
high standards of transparency to demonstrate why each new fee or fee
increase meets the requirements of the Act that fees be reasonable,
equitably allocated, not unfairly discriminatory, and not create an
undue burden on competition among market participants. The Exchange
believes this high standard is especially important when an exchange
imposes various access fees for market participants to access an
exchange's marketplace. The Exchange believes it has achieved this
standard in this filing and in the First and Second Proposed Rules
Changes. Similar justifications for the proposed fee change included in
the First and Second Proposed Rule Changes, but also in this filing,
were previously included in similar fee changes filed by the Exchange
and its affiliates, MIAX Emerald and MIAX, and SIG did not submit a
comment letter on those filings.\81\ Those filings were not suspended
by the Commission and continue to remain in effect. The justification
included in each of the prior filings was the result of numerous
withdrawals and re-filings of the proposals to address comments
received from Commission Staff over many months. The Exchange and its
affiliates have worked diligently with Commission Staff on ensuring the
justification included in past fee filings fully supported an assertion
that those proposed fee changes were consistent with the Act.\82\ The
Exchange leveraged

[[Page 10851]]

its past work with Commission Staff to ensure the justification
provided herein and in the First, Second, and Third Proposed Rule
Changes included the same level of detail (or more) as the prior fee
changes that survived Commission scrutiny. The Exchange's detailed
disclosures in fee filings have also been applauded by one industry
group which noted, ``[the Exchange's] filings contain significantly
greater information about who is impacted and how than other filings
that have been permitted to take effect without suspension.'' \83\ That
same industry group also noted their ``worry that the Commission's
process for reviewing and evaluating exchange filings may be
inconsistently applied.'' \84\ Therefore, a finding by the Commission
that the Exchange has not met its burden to show that the proposed fee
change is consistent with the Act would be different than the
Commission's treatment of similar past filings, would create further
ambiguity regarding the standards exchange fee changes should satisfy,
and is not warranted here.
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\80\ The Exchange has incurred a cumulative loss of $86 million
since its inception in 2017 to 2020, the last year for which the
Exchange's Form 1 data is available. See Exchange's Form 1/A,
Application for Registration or Exemption from Registration as a
National Securities Exchange, filed July 29, 2021, available at
<a href="https://sec.report/Document/9999999997-21-004367/">https://sec.report/Document/9999999997-21-004367/</a>.
\81\ See Securities Exchange Act Release Nos. 91858 (May 12,
2021), 86 FR 26967 (May 18, 2021) (SR-PEARL-2021-23) (Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change to
Amend the MIAX Pearl Fee Schedule to Remove the Cap on the Number of
Additional Limited Service Ports Available to Market Makers); 91460
(April 2, 2021), 86 FR 18349 (April 8, 2021) (SR-EMERALD-2021-11)
(Notice of Filing and Immediate Effectiveness of a Proposed Rule
Change To Amend Its Fee Schedule To Adopt Port Fees, Increase
Certain Network Connectivity Fees, and Increase the Number of
Additional Limited Service MIAX Emerald Express Interface Ports
Available to Market Makers); and 91857 (May 12, 2021), 86 FR 26973
(May 18, 2021) (SR-MIAX-2021-19) (Notice of Filing and Immediate
Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule To
Remove the Cap on the Number of Additional Limited Service Ports
Available to Market Makers).
\82\ See, e.g., Securities Exchange Act Release No. 90196
(October 15, 2020), 85 FR 67064 (October 21, 2020) (SR-EMERALD-2020-
11) (Notice of Filing and Immediate Effectiveness of a Proposed Rule
Change To Amend Its Fee Schedule To Adopt One-Time Membership
Application Fees and Monthly Trading Permit Fees). See Securities
Exchange Act Release Nos. 90601 (December 8, 2020), 85 FR 80864
(December 14, 2020) (SR-EMERALD-2020-18) (re-filing with more detail
added in response to Commission Staff's feedback and after
withdrawing SR-EMERALD-2020-11); and 91033 (February 1, 2021), 86 FR
8455 (February 5, 2021) (SR-EMERALD-2021-03) (re-filing with more
detail added in response to Commission Staff's feedback and after
withdrawing SR-EMERALD-2020-18). The Exchange initially filed a
proposal to remove the cap on the number of additional Limited
Service MEO Ports available to Members on April 9, 2021. See SR-
PEARL-2021-17. On April 22, 2021, the Exchange withdrew SR-PEARL-
2021-17 and refiled that proposal (without increasing the actual fee
amounts) to provide further clarification regarding the Exchange's
revenues, costs, and profitability any time more Limited Service MEO
Ports become available, in general, (including information regarding
the Exchange's methodology for determining the costs and revenues
for additional Limited Service MEO Ports). See SR-PEARL-2021-20. On
May 3, 2021, the Exchange withdrew SR-PEARL-2021-20 and refiled that
proposal to further clarify its cost methodology. See SR-PEARL-2021-
22. On May 10, 2021, the Exchange withdrew SR-PEARL-2021-22 and
refiled that proposal as SR-PEARL-2021-23. See Securities Exchange
Act Release No. 91858 (May 12, 2021), 86 FR 26967 (May 18, 2021)
(SR-PEARL-2021-23).
\83\ See letter from Tyler Gellasch, Executive Director, Healthy
Markets Association, to Hon. Gary Gensler, Chair, Commission, dated
October 29, 2021.
\84\ Id. (providing examples where non-transaction fee filings
by other exchanges have been permitted to remain effective and not
suspended by the Commission despite less disclosure and
justification).
---------------------------------------------------------------------------

In addition, the arguments in the SIG Letter do not support their
claim that the Exchange has not met its burden to show the proposed
rule change is consistent with the Act. Prior to and after submitting
the First Proposed Rule Change, the Exchange solicited feedback from
its Members, including SIG. SIG relayed their concerns regarding the
proposed change. The Exchange then sought to work with SIG to address
their concerns and gain a better understanding of the access/
connectivity/quoting infrastructure of other exchanges. In response,
SIG provided no substantive suggestions on how to amend the First
Proposed Rule Change to address their concerns and instead chose to
submit a comment letter. One could argue that SIG is using the comment
letter process not to raise legitimate regulatory concerns regarding
the proposal, but to inhibit or delay proposed fee changes by the
Exchange. Nonetheless, the Exchange has further enhanced its cost and
revenue analysis and data in this Third [sic] Proposed Rule Change to
further justify that the Proposed Access Fees are reasonable in
accordance with the Commission Staff's Guidance. Among other things,
these enhancements include providing baseline information in the form
of data from the month before the Proposed Access Fees became
effective.
MIAX Pearl Provided More Than Sufficient Justification for the Proposed
Fees
The SIG Letter asserts that the Exchange provided ``no affirmative
justifiable reason that its legacy fees are no longer sufficient.''
\85\ This statement assumes that the previous fees were ``sufficient''
and does not state how the legacy fees might have been sufficient to
cover the Exchange's expenses. As evidenced above, the previous fees
were not sufficient to cover the costs the Exchange incurred in
providing access to the Exchange. However, the previous fees were
sufficient to attract order flow as the pricing was set to not
discourage participation on the Exchange. The Exchange is relatively
new as it only began operations in 2017.\86\ Like other new exchange
entrants, the Exchange chose to charge lower fees than other more
established exchanges to attract order flow and increase
membership.\87\ The Exchange chose that approach by setting the price
of its Trading Permits (as well as other access-type fees) below market
rates. SIG's statement assumes that exchanges should charge at market
rates that are sufficient to cover its costs. This statement ignores
pricing incentives exchanges may offer to attract order flow and that
exchanges, like many businesses including SIG, may make a business
decision to price certain offerings at a loss or ``on sale'' as they
build their business. Further, a vast majority of the Exchange's
Members, if not all, benefited from these lower fees.
---------------------------------------------------------------------------

\85\ See SIG Letter, supra note 7.
\86\ See ``Miami International Holdings Receives Approval from
SEC to Launch MIAX PEARL; Targets February 6, 2017 Launch''
(December 14, 2016) available at <a href="https://www.miaxoptions.com/sites/default/files/press_release-files/MIAX_Press_Release_12142016.pdf">https://www.miaxoptions.com/sites/default/files/press_release-files/MIAX_Press_Release_12142016.pdf</a>
(last visited October 18, 2021) (stating that the Exchange ``plans
to launch with an initial moratorium on most non-transaction
fees.'')
\87\ See, e.g., ``Members Exchange Unveils Transaction Pricing''
(September 10, 2020), available at <a href="https://www.businesswire.com/news/home/20200910005183/en/Members-Exchange-Unveils-Transaction-Pricing">https://www.businesswire.com/news/home/20200910005183/en/Members-Exchange-Unveils-Transaction-Pricing</a> (last visited October 18, 2021) (quoting Jonathan Kellner,
CEO of Members Exchange, ``[t]o further incentivize participants to
connect to a new destination, we are implementing initial pricing
that generates a net loss for the exchange on each transaction. We
are confident that as participants experience the benefits of our
platform, they will continue to incorporate MEMX in their routing
strategies.''); and ``Miami International Holdings Announces Fully
Subscribed Strategic Equity Rights Transaction with Leading Equities
Firms to Trade on MIAX PEARL Equities Trading to Begin September 25,
2020'' available at <a href="https://www.miaxoptions.com/sites/default/files/press_release-files/Press_Release_09142020.pdf">https://www.miaxoptions.com/sites/default/files/press_release-files/Press_Release_09142020.pdf</a> (last visited October
18, 2021) (quoting Douglas M. Schafer, Jr., Executive Vice President
and Chief Information Officer of MIH, MIAX PEARL Equities, ``[w]e
are excited to be offering a simpler, transparent, low cost venue to
market participants and have no doubt that MIAX PEARL Equities will
become a competitive alternative venue following our launch on
September 25th.'')
---------------------------------------------------------------------------

As a new entrant in the market, the Exchange chose to forgo any
potential additional revenue that may have been generated by higher
Trading Permit fees to encourage participation on the new platform.
This served to attract participation on the Exchange so market
participants could evaluate the Exchange's quality, technology and the
quality of their overall customer/user experience. Setting higher rates
for non-transaction fees could have served to dissuade market
participants from trading on the Exchange and not experiencing the high
quality technological system the Exchange built.
Nonetheless, the Exchange provided significant cost based
justification for the proposed fees not only in this filing, but also
in the First and Second Proposed Rule Changes. The SIG Letter
conveniently ignores this fact. In fact, the level of disclosure the
Exchange provided in this filing and in the First, Second, and Third
Proposed Rule Changes has been worked on with Commission Staff over
numerous past filings that have been published for comment and remain
effect.\88\ The Exchange's detailed disclosures in fee filings have
also been applauded by one industry group which noted, ``[the
Exchange's] filings contain significantly greater information about who
is impacted and how than other filings that have been permitted to take
effect without suspension.'' \89\ That same industry group also noted
their ``worry that the Commission's process for reviewing and
evaluating exchange filings may be inconsistently applied.'' \90\
---------------------------------------------------------------------------

\88\ See supra note 82.
\89\ See supra note 83.
\90\ Id. (providing examples where non-transaction fee filings
by other exchanges have been permitted to remain effective and not
suspended by the Commission despite less disclosure and
justification).

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[[Page 10852]]

The Exchange believes the proposed fees will allow the Exchange to
offset expenses the Exchange has and will incur, and that the Exchange
provided sufficient transparency into how the Exchange determined to
charge such fees. Accordingly, the Exchange provided an analysis of its
revenues, costs, and profitability associated with the proposed fees.
This analysis included information regarding its methodology for
determining the costs and revenues associated with the proposal.
To determine the Exchange's costs to provide the access services
associated with the proposed fees, the Exchange conducted an extensive
cost review in which the Exchange analyzed nearly every expense item in
the Exchange's general expense ledger to determine whether each such
expense relates to the proposed fees, and, if such expense did so
relate, what portion (or percentage) of such expense actually supports
the access services. The sum of all such portions of expenses
represents the total cost of the Exchange to provide the access
services associated with the proposed fees.
Furthermore, the Exchange is beginning to see significant
inflationary pressure on capital items that it needs to purchase to
maintain the Exchange's technology and systems.\91\ The Exchange has
seen pricing increases upwards of 30% on network equipment due to
supply chain shortages. This, in turn, results in higher overall costs
for ongoing system maintenance, but also to purchase the items
necessary to ensure ongoing system resiliency, performance, and
determinism. These costs are expected to continue to go up as the U.S.
economy continues to struggle with supply chain and inflation related
issues.
---------------------------------------------------------------------------

\91\ See supra note 55.
---------------------------------------------------------------------------

The Proposed Fee Increases Are Not Part of a Discriminatory Fee
Structure and Tiered Fee Structures Are Commonplace Amongst Exchanges
The SIG Letter correctly notes that the proposed Trading Permit
fees are higher for Members who connect through the MEO Interface than
for Members who connect through the FIX Interface. Members who use the
MEO Interface may also connect to the System through the FIX Interface
as well, and vice versa. The Exchange notes that the Trading Permit
fees for Members who connect through the MEO Interface are higher than
the Trading Permit fees for Members who connect through the FIX
Interface, since the FIX Interface utilizes less capacity and resources
of the Exchange. The MEO Interface offers lower latency and higher
throughput, which utilizes greater capacity and resources of the
Exchange. The FIX Interface offers lower bandwidth requirements and an
industry-wide uniform message format. Both EEMs and Market Makers may
connect to the Exchange using either interface.
The SIG Letter asserts that the Exchange ``provides no description
of the `capacity and resources' being utilized, and no information on
the nature or extent of the disparity in such utilization between the
two Interface types.'' As a MEO user, SIG is uniquely positioned to
understand and appreciate the differences between the MEO and FIX
interfaces and why rates for the MEO interface are justifiably higher.
Nonetheless, the Exchange is providing the below additional data to
address the statements made in the SIG Letter.
Orders on the Exchange are supplied by Members via two different
interfaces, FIX and MEO. MEO is the Exchange's proprietary binary order
interface. Over the period from April 2021 until September 2021, 3.15
billion messages were processed via the FIX interface (0.43% of total
messages received). Over that same time period, 731.4 billion messages
(99.57% of total messages received) were processed over the MEO
interface. Also, the MEO interface allows for mass purging of orders
which has a significant impact on the number of messages processed.
This marked difference between the number of FIX and MEO messages
processed, when mapped to servers, software, storage, and networking
results in a much higher allocation of total capital and operational
expense to support the MEO interface. For one, the Exchange incurs
greater expense in maintaining the resilience of the MEO interface to
ensure its ongoing operation in accordance with Regulation SCI.
Another, the Exchange must purchase and expand its storage capacity to
retain these increased messages in compliance with its record keeping
obligations. As noted above, the Exchange has seen significant
inflationary pressure on capital items that it needs to purchase to
maintain its technology.\92\ The Exchange has seen pricing increases
upwards of 30% on network equipment due to supply chain shortages.
---------------------------------------------------------------------------

\92\ See id.
---------------------------------------------------------------------------

SIG is also uniquely positioned to know that the fee structure
utilized by the Exchange, which charges different Trading Permit fees
for MEO interface users than FIX interface users is not a new proposal.
In fact, it was first adopted by the Exchange over 3\1/2\ years ago in
March 2018, published by the Commission and received no comment
letters, not even by SIG.\93\ SIG claims a fee structure that they have
been subject to for years as an MEO interface user is just now unfairly
discriminatory.
---------------------------------------------------------------------------

\93\ See supra note 13.
---------------------------------------------------------------------------

The Proposed Fees Are in Line With, or Cheaper Than, the Trading Permit
Fees or Similar Membership/Access Fees Charged by Other Options
Exchanges
The Exchange correctly asserts herein and in the Initial Proposed
Fee Change that it's proposed Trading Permit fees ``are in line with,
or cheaper than, the trading permit fees or similar membership fees
charged by other options exchanges.'' The SIG letter challenges this
assertion is an ``apples to oranges'' comparison because NYSE American
and NYSE Arca based their rates on the number of options issued to the
member and not trading volume, like the exchange does. In fact, the
number of options traded by a member of NYSE American or NYSE Arca is
an appropriate proxy for trading volume as the more options issued to
the member would result in higher volumes traded by that member. Firms
that trade more liquid options generate increased message traffic and
greater pull on exchange resources. Therefore, comparing options traded
to trading volume is an ``apples to apples'' comparison.
The Exchange proposes a range of fees from $500 to $6,000 per month
depending on trading volume and the type of interface that is utilized
by the Member. These rates are undoubtedly similar to or lower than the
rates charged by NYSE Arca and NYSE American. As of December 20, 2021,
the Exchange maintained a market share of approximately 4.03%.\94\
Among Exchanges with similar market share, the Exchange's proposed
Trading Permit Fees remain similar to or lower than fees charged by
other options exchanges with comparable market share for access/
membership fees.\95\ The proposed rates are also lower than those of
its affiliates, MIAX and MIAX

[[Page 10853]]

Emerald, which remain in effect today.\96\
---------------------------------------------------------------------------

\94\ See supra note 77.
\95\ See supra notes 26-30, and accompanying table. The below
market share numbers are as of December 20, 2021. Id. Cboe C2 had a
market share of 3.72% and charges a monthly Access Fee of $5,000 for
market makers and $1,000 per month for an additional Electronic
Access Permit regardless of trading volume or options traded. See
supra note 28. Nasdaq ISE had a market share of 6.95% and charges a
monthly Access Fee to Primary Market Makers of $5,000 and
Competitive Market Maker of $2,500 regardless of trading volume or
options traded. See supra note 77.
\96\ See MIAX Fee Schedule, Section 3(b); MIAX Emerald Fee
Schedule, Section 3(b).
---------------------------------------------------------------------------

The SIG Letter states that ``[the Exchange] offers no information
about the capacity and resource costs of access to the other exchanges
or any other basis to support the reasonability of those fees, let
alone compare such costs to those of MIAX Pearl.'' \97\ This statement
is misleading as SIG should be aware that the Exchange does not have
access to this information and when it asked SIG to assist the Exchange
in better understanding the access structure of other exchanges, SIG
refused.
---------------------------------------------------------------------------

\97\ See SIG Letter, supra note 7.
---------------------------------------------------------------------------

The SIG Letter further asserts that the Exchange ``has not
established that the other exchange fees are reasonable, nor that this
would mean that the MIAX Pearl fees are reasonable as well.\98\ SIG
should be aware that it is not the Exchange's obligation to justify why
another exchange's fees are reasonable and it is presumed that such
fees were deemed reasonable by the Commission when filed by the
exchange that proposed said fee. If SIG felt another exchange's fees
were or are unreasonable, they are free to share that concern with the
Commission and were provided an opportunity to submit comment letter on
those earlier proposals from other exchanges. It is the Exchange's
responsibility to show that its own proposed fee change is reasonable
and consistent with the Act, and that assertion is amply supported by
the statements made in this Item 5 and elsewhere herein.
---------------------------------------------------------------------------

\98\ See id.
---------------------------------------------------------------------------

The Proposed Fees Are Consistent With Section 6(b)(4) of the Act
Because the Proposed Fees Will Not Result in Excessive Pricing or
Supra-Competitive Profit
The Exchange has provided ample data that the proposed fees would
not result in excessive pricing or a supra-competitive profit. In this
Third [sic] Proposed Rule Change, the Exchange no longer utilizes a
comparison of its profit margin to that of other options exchanges as a
basis that the Proposed Access Fees are reasonable. Rather, the
Exchange has enhanced its cost and revenue analysis and data in this
Third [sic] Proposed Rule Change to further justify that the Proposed
Access Fees are reasonable in accordance with the Commission Staff's
Guidance. Therefore, the Exchange believes it is no longer necessary to
respond to this portion of the SIG Letter.
Recoupment of Exchange Infrastructure Costs
Nowhere in this proposal or in the First Proposed Rule Change did
the Exchange assert that it benefits competition to allow a new
exchange entrant to recoup their infrastructure costs. Rather, the
Exchange asserts above that its ``proposed fees are reasonable,
equitably allocated and not unfairly discriminatory because the
Exchange, and its affiliates, are still recouping the initial
expenditures from building out their systems while the legacy exchanges
have already paid for and built their systems.'' The Exchange no longer
makes this assertion in this filing and, therefore, does not believe is
it necessary to respond to SIG's assertion here.

III. Suspension of the Proposed Rule Change

Pursuant to Section 19(b)(3)(C) of the Act,\99\ at any time within
60 days of the date of filing of a proposed rule change pursuant to
Section 19(b)(1) of the Act,\100\ the Commission summarily may
temporarily suspend the change in the rules of a self-regulatory
organization (``SRO'') if it appears to the Commission that such action
is necessary or appropriate in the public interest, for the protection
of investors, or otherwise in furtherance of the purposes of the Act.
As discussed below, the Commission believes a temporary suspension of
the proposed rule change is necessary and appropriate to allow for
additional analysis of the proposed rule change's consistency with the
Act and the rules thereunder.
---------------------------------------------------------------------------

\99\ 15 U.S.C. 78s(b)(3)(C).
\100\ 15 U.S.C. 78s(b)(1).
---------------------------------------------------------------------------

As the Exchange further details above, the Exchange first filed a
proposed rule change proposing fee changes as proposed herein on July
1, 2021, with the proposed fee changes being immediately effective.
That proposal, SR-PEARL-2021-32, was published for comment in the
Federal Register on July 15, 2021.\101\ On August 27, 2021, pursuant to
Section 19(b)(3)(C) of the Act, the Commission: (1) Temporarily
suspended the proposed rule change (SR-PEARL-2021-32) and (2)
instituted proceedings to determine whether to approve or disapprove
the proposed rule change.\102\ On October 12, 2021, the Exchange
withdrew SR-PEARL-2021-32. On November 1, 2021, the Exchange filed a
proposed rule change proposing fee changes as proposed herein. That
proposal, SR-PEARL-2021-54, was published for comment in the Federal
Register on November 17, 2021.\103\ On December 20, 2021, the Exchange
withdrew SR-PEARL-2021-54 and filed a proposed rule change proposing
fee changes as proposed herein on December 20, 2021. That filing, SR-
PEARL-2021-59,\104\ was published for comment in the Federal Register
on January 10, 2022.\105\ On February 15, 2022 the Exchange withdrew
SR-PEARL-2021-59 and filed the instant filing, which is substantially
similar.
---------------------------------------------------------------------------

\101\ See Securities Exchange Act Release No. 92366 (July 9,
2021), 86 FR 37379 (SR-PEARL-2021-32). The Commission received one
comment letter on that proposal. Comment for SR-PEARL-2021-32 can be
found at: <a href="https://www.sec.gov/comments/sr-pearl-2021-32/srpearl202132.htm">https://www.sec.gov/comments/sr-pearl-2021-32/srpearl202132.htm</a>.
\102\ See Securities Exchange Act Release No. 92797 (August 27,
2021), 86 FR 49399 (September 2, 2021).
\103\ See Securities Exchange Act Release No. 93555 (November
10, 2021), 86 FR 64254 (November 17, 2021) (SR-PEARL-2021-54).
\104\ See text accompanying supra note 10.
\105\ See Securities Exchange Act Release No. 93895 (January 4,
2022), 87 FR 1217 (January 10, 2022) (SR-PEARL-2021-59).
---------------------------------------------------------------------------

When exchanges file their proposed rule changes with the
Commission, including fee filings like the Exchange's present proposal,
they are required to provide a statement supporting the proposal's
basis under the Act and the rules and regulations thereunder applicable
to the exchange.\106\ The instructions to Form 19b-4, on which
exchanges file their proposed rule changes, specify that such statement
``should be sufficiently detailed and specific to support a finding
that the proposed rule change is consistent with [those]
requirements.'' \107\
---------------------------------------------------------------------------

\106\ See 17 CFR 240.19b-4 (Item 3 entitled ``Self-Regulatory
Organization's Statement of the Purpose of, and Statutory Basis for,
the Proposed Rule Change'').
\107\ Id.
---------------------------------------------------------------------------

Among other things, exchange proposed rule changes are subject to
Section 6 of the Act, including Sections 6(b)(4), (5), and (8), which
requires the rules of an exchange to: (1) Provide for the equitable
allocation of reasonable fees among members, issuers, and other persons
using the exchange's facilities; \108\ (2) perfect the mechanism of a
free and open market and a national market system, protect investors
and the public interest, and not permit unfair discrimination between
customers, issuers, brokers, or dealers; \109\ and (3) not impose any
burden on competition not necessary or appropriate in furtherance of
the purposes of the Act.\110\
---------------------------------------------------------------------------

\108\ 15 U.S.C. 78f(b)(4).
\109\ 15 U.S.C. 78f(b)(5).
\110\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

In temporarily suspending the Exchange's fee change, the Commission
intends to further consider whether the proposal to remove certain
credits and

[[Page 10854]]

increase the monthly Trading Permits fees are consistent with the
statutory requirements applicable to a national securities exchange
under the Act. In particular, the Commission will consider whether the
proposed rule change satisfies the standards under the Act and the
rules thereunder requiring, among other things, that an exchange's
rules provide for the equitable allocation of reasonable fees among
members, issuers, and other persons using its facilities; not be
designed to permit unfair discrimination between customers, issuers,
brokers or dealers; and not impose any burden on competition not
necessary or appropriate in furtherance of the purposes of the
Act.\111\
---------------------------------------------------------------------------

\111\ See 15 U.S.C. 78f(b)(4), (5), and (8), respectively.
---------------------------------------------------------------------------

Therefore, the Commission finds that it is appropriate in the
public interest, for the protection of investors, and otherwise in
furtherance of the purposes of the Act, to temporarily suspend the
proposed rule change.\112\
---------------------------------------------------------------------------

\112\ For purposes of temporarily suspending the proposed rule
change, the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
---------------------------------------------------------------------------

IV. Proceedings To Determine Whether To Approve or Disapprove the
Proposed Rule Change

The Commission is instituting proceedings pursuant to Sections
19(b)(3)(C) \113\ and 19(b)(2)(B) \114\ of the Act to determine whether
the Exchange's proposed rule change should be approved or disapproved.
Institution of such proceedings is appropriate at this time in view of
the legal and policy issues raised by the proposed rule change.
Institution of proceedings does not indicate that the Commission has
reached any conclusions with respect to any of the issues involved.
Rather, as described below, the Commission seeks and encourages
interested persons to provide comments on the proposed rule change to
inform the Commission's analysis of whether to approve or disapprove
the proposed rule change.
---------------------------------------------------------------------------

\113\ 15 U.S.C. 78s(b)(3)(C). Once the Commission temporarily
suspends a proposed rule change, Section 19(b)(3)(C) of the Act
requires that the Commission institute proceedings under Section
19(b)(2)(B) to determine whether a proposed rule change should be
approved or disapproved.
\114\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

Pursuant to Section 19(b)(2)(B) of the Act,\115\ the Commission is
providing notice of the grounds for possible disapproval under
consideration. The Commission is instituting proceedings to allow for
additional analysis of whether the Exchange has sufficiently
demonstrated how the proposed rule change is consistent with Sections
6(b)(4),\116\ 6(b)(5),\117\ and 6(b)(8) \118\ of the Act. Section
6(b)(4) of the Act requires that the rules of a national securities
exchange provide for the equitable allocation of reasonable dues, fees,
and other charges among its members and issuers and other persons using
its facilities. Section 6(b)(5) of the Act requires that the rules of a
national securities exchange be designed, among other things, to
promote just and equitable principles of trade, to remove impediments
to and perfect the mechanism of a free and open market and a national
market system and, in general, to protect investors and the public
interest, and not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers. Section 6(b)(8) of the Act
requires that the rules of a national securities exchange not impose
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act.
---------------------------------------------------------------------------

\115\ 15 U.S.C. 78s(b)(2)(B). Section 19(b)(2)(B) of the Act
also provides that proceedings to determine whether to disapprove a
proposed rule change must be concluded within 180 days of the date
of publication of notice of the filing of the proposed rule change.
See id. The time for conclusion of the proceedings may be extended
for up to 60 days if the Commission finds good cause for such
extension and publishes its reasons for so finding, or if the
exchange consents to the longer period. See id.
\116\ 15 U.S.C. 78f(b)(4).
\117\ 15 U.S.C. 78f(b)(5).
\118\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

The Commission asks that commenters address the sufficiency of the
Exchange's statements in support of the proposal, in addition to any
other comments they may wish to submit about the proposed rule change.
In particular, the Commission seeks comment on the following aspects of
the proposal and asks commenters to submit data where appropriate to
support their views:
1. Cost Estimates and Allocation. The Exchange states that it is
not asserting that the Proposed Access Fees are constrained by
competitive forces, but rather set forth a ``cost-plus model,''
employing a ``conservative methodology'' that ``strictly considers only
those costs that are most clearly directly related to the provision and
maintenance of Trading Permits.'' \119\ Setting forth its costs in
providing the Proposed Access Fees, and as summarized in greater detail
above, the Exchange projects $844,741 in aggregate annual estimated
costs for 2021 as the sum of: (1) $188,815 in third-party expenses paid
in total to Equinix (8% of the total applicable expense) for data
center services; Zayo Group Holdings, for network services (4% of the
total applicable expense); SFTI for connectivity support, Thompson
Reuters, NYSE, Nasdaq, and Internap and others (3% of the total
applicable expense) for content, connectivity services, and
infrastructure services; and various other hardware and software
providers (5% of the total applicable expense) supporting the
production environment, and (2) $655,925 in internal expenses,
allocated to (a) employee compensation and benefit costs ($549,824,
approximately 6% of the Exchange's total applicable employee
compensation and benefits expense); (b) depreciation and amortization
($66,316, approximately 5% of the Exchange's total applicable
depreciation and amortization expense); and (c) occupancy costs
($39,775 approximately 8% of the Exchange's total applicable occupancy
expense). Do commenters believe that the Exchange has provided
sufficient detail about how it determined which costs are most clearly
directly associated with providing and maintaining the Proposed Access
Fees? The Exchange describes a ``proprietary'' process involving all
Exchange department heads, including the finance department and
numerous meetings between the Exchange's Chief Information Officer,
Chief Financial Officer, Head of Strategic Planning and Operations,
Chief Technology Officer, various members of the Legal Department, and
other group leaders, but do not specify further what principles were
applied in making these determinations or arriving at particular
allocations. Do commenters believe further explanation is necessary?
For employee compensation and benefit costs, for example, the Exchange
calculated an allocation of employee time in several departments,
including Technology, Back Office, Systems Operations, Networking,
Business Strategy Development, Trade Operations, Finance, and Legal,
but do not provide the job titles and salaries of persons whose time
was accounted for, or explain the methodology used to determine how
much of an employee's time is devoted to that specific activity. What
are commenters' views on whether the Exchange has provided sufficient
detail on the identity and nature of services provided by third
parties? Across all of the Exchange's projected costs, what are
commenters' views on whether the Exchange has provided sufficient
detail on the elements that go into Trading Permit costs, including how
shared costs are

[[Page 10855]]

allocated and attributed to Trading Permit expenses, to permit an
independent review and assessment of the reasonableness of purported
cost-based fees and the corresponding profit margin thereon? Should the
Exchange be required to identify for what services or fees the
remaining percentage of un-allocated expenses are attributable to? Do
commenters believe that the costs projected for 2021 are generally
representative of expected costs going forward (to the extent
commenters consider 2021 to be a typical or atypical year), or should
an exchange present an estimated range of costs with an explanation of
how profit margins could vary along the range of estimated costs?
Should the Exchange use cost projections or actual costs estimated for
2021 in a filing made in 2022, or make cost projections for 2022?
---------------------------------------------------------------------------

\119\ See supra Section II.A.2.
---------------------------------------------------------------------------

2. Revenue Estimates and Profit Margin Range. The Exchange provides
a single monthly revenue figure as the basis for calculating the profit
margin of 24%. Do commenters believe this is reasonable? If not, why
not? The Exchange states that their proposed fee structure is
``designed to cover its costs with a limited return in excess of such
costs,'' and that ``revenue and associated profit margin [ ] are not
solely intended to cover the costs associated with providing services
subject to the proposed fees,'' and believes that a 24% margin is a
limited return over such costs.\120\ The profit margin is also
dependent on the accuracy of the cost projections which, if inflated
(intentionally or unintentionally), may render the projected profit
margin meaningless. The Exchange acknowledges that this margin may
fluctuate from month to month due to changes in the number of Trading
Permits purchased, and that costs may increase. They also state that
the number of Trading Permits has not materially changed over the prior
months and so the months that the Exchange has used as a baseline to
perform its assessment are representative of reasonably anticipated
costs and expenses.\121\ The Exchange does not account for the
possibility of cost decreases, however. What are commenters' views on
the extent to which actual costs (or revenues) deviate from projected
costs (or revenues)? Do commenters believe that the Exchange's
methodology for estimating the profit margin is reasonable? Should the
Exchange provide a range of profit margins that they believe are
reasonably possible, and the reasons therefor?
---------------------------------------------------------------------------

\120\ See supra Section II.A.2.
\121\ See id.
---------------------------------------------------------------------------

3. Reasonable Rate of Return. Do commenters agree with the Exchange
that its expected 24% profit margin would constitute a reasonable rate
of return over cost for Trading Permits? If not, what would commenters
consider to be a reasonable rate of return and/or what methodology
would they consider to be appropriate for determining a reasonable rate
of return? What are commenters' views regarding what factors should be
considered in determining what constitutes a reasonable rate of return
for Trading Permits? Do commenters believe it relevant to an assessment
of reasonableness that the Exchange's proposed fees for Trading
Permits, even at the highest tier, are lower than those of other
options exchanges to which the Exchange has compared the Proposed
Access Fees? Should an assessment of reasonable rate of return include
consideration of factors other than costs; and if so, what factors
should be considered, and why?
4. Periodic Reevaluation. The Exchange has addressed whether it
believes a material deviation from the anticipated profit margin would
warrant the need to make a rule filing pursuant to Section 19(b) of the
Act to increase or decrease the fees accordingly, stating that ``[a]ny
requirement that an exchange should conduct a periodic re-evaluation on
a set timeline of its cost justification and amend its fees accordingly
should be established by the Commission holistically, applied to all
exchanges and not just pending fee proposals, such as this filing,''
and that ``[i]n order to be fairly applied, such a mandate should be
applied to existing market data fees as well.'' \122\ In light of the
impact that the number of subscribers has on Trading Permit profit
margins, and the potential for costs to decrease (or increase) over
time, what are commenters' views on the need for exchanges to commit to
reevaluate, on an ongoing and periodic basis, their cost-based Trading
Permit fees to ensure that they stay in line with their stated
profitability target and do not become unreasonable over time, for
example, by failing to adjust for efficiency gains, cost increases or
decreases, and changes in subscribers? How formal should that process
be, how often should that reevaluation occur, and what metrics and
thresholds should be considered? How soon after a new Trading Permit
fee change is implemented should an exchange assess whether its
subscriber estimates were accurate and at what threshold should an
exchange commit to file a fee change if its estimates were inaccurate?
Should an initial review take place within the first 30 days after a
Trading Permit fee is implemented? 60 days? 90 days? Some other period?
---------------------------------------------------------------------------

\122\ See supra Section II.A.2.
---------------------------------------------------------------------------

5. Tiered Structure for Trading Permits. The Exchange states that
proposed tiered-pricing structure is reasonable, fair, equitable, and
not unfairly discriminatory because it is the model adopted by the
Exchange when it launched operations for its Trading Permit fees, and
further, that the amount of the fee is directly related to the Member
or non-Member's TCV resulting in higher fees for greater TCV.\123\ What
are commenters' views on the adequacy of the information the Exchange
provides regarding the proposed differentials in fees? Do commenters
believe that the proposed price differences are supported by the
Exchange's assertions that it set the level of each proposed new fee in
a manner that it equitable and not unfairly discriminatory?
---------------------------------------------------------------------------

\123\ See id.
---------------------------------------------------------------------------

Under the Commission's Rules of Practice, the ``burden to
demonstrate that a proposed rule change is consistent with the Exchange
Act and the rules and regulations issued thereunder . . . is on the
[SRO] that proposed the rule change.'' \124\ The description of a
proposed rule change, its purpose and operation, its effect, and a
legal analysis of its consistency with applicable requirements must all
be sufficiently detailed and specific to support an affirmative
Commission finding,\125\ and any failure of an SRO to provide this
information may result in the Commission not having a sufficient basis
to make an affirmative finding that a proposed rule change is
consistent with the Act and the applicable rules and regulations.\126\
Moreover, ``unquestioning reliance'' on an SRO's representations in a
proposed rule change would not be sufficient to justify Commission
approval of a proposed rule change.\127\
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\124\ 17 CFR 201.700(b)(3).
\125\ See id.
\126\ See id.
\127\ See Susquehanna Int'l Group, LLP v. Securities and
Exchange Commission, 866 F.3d 442, 446-47 (D.C. Cir. 2017)
(rejecting the Commission's reliance on an SRO's own determinations
without sufficient evidence of the basis for such determinations).
---------------------------------------------------------------------------

The Commission believes it is appropriate to institute proceedings
to allow for additional consideration and comment on the issues raised
herein, including as to whether the proposal is consistent with the
Act, any potential comments or supplemental information

[[Page 10856]]

provided by the Exchange, and any additional independent analysis by
the Commission.

V. Commission's Solicitation of Comments

The Commission requests written views, data, and arguments with
respect to the concerns identified above as well as any other relevant
concerns. In particular, the Commission invites the written views of
interested persons concerning whether the proposal is consistent with
Sections 6(b)(4), 6(b)(5), and 6(b)(8), or any other provision of the
Act, or the rules and regulations thereunder. The Commission asks that
commenters address the sufficiency and merit of the Exchange's
statements in support of the proposal, in addition to any other
comments they may wish to submit about the proposed rule change.
Although there do not appear to be any issues relevant to approval or
disapproval that would be facilitated by an oral presentation of views,
data, and arguments, the Commission will consider, pursuant to Rule
19b-4, any request for an opportunity to make an oral
presentation.\128\
---------------------------------------------------------------------------

\128\ 15 U.S.C. 78s(b)(2). Section 19(b)(2) of the Act grants
the Commission flexibility to determine what type of proceeding--
either oral or notice and opportunity for written comments--is
appropriate for consideration of a particular proposal by an SRO.
See Securities Acts Amendments of 1975, Report of the Senate
Committee on Banking, Housing and Urban Affairs to Accompany S. 249,
S. Rep. No. 75, 94th Cong., 1st Sess. 30 (1975).
---------------------------------------------------------------------------

Interested persons are invited to submit written data, views, and
arguments regarding whether the proposal should be approved or
disapproved by March 18, 2022. Any person who wishes to file a rebuttal
to any other person's submission must file that rebuttal by April 1,
2022.
Comments may be submitted by any of the following methods:

Electronic Comments

<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#7b090e171e56181416161e150f083b081e18551c140d"><span class="__cf_email__" data-cfemail="e092958c85cd838f8d8d858e9493a0938583ce878f96">[email&#160;protected]</span></a>. Please include
File No. SR-PEARL-2022-05 on the subject line.

Paper Comments

<bullet> Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-PEARL-2022-05. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-PEARL-2022-05 and should be submitted on
or before March 18, 2022. Rebuttal comments should be submitted by
April 1, 2022.

VI. Conclusion

It is therefore ordered, pursuant to Section 19(b)(3)(C) of the
Act,\129\ that File Numbers SR-PEARL-2022-05 be, and hereby is,
temporarily suspended. In addition, the Commission is instituting
proceedings to determine whether the proposed rule change should be
approved or disapproved.
---------------------------------------------------------------------------

\129\ 15 U.S.C. 78s(b)(3)(C).

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\130\
---------------------------------------------------------------------------

\130\ 17 CFR 200.30-3(a)(12), (57) and (58).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-03965 Filed 2-24-22; 8:45 am]
BILLING CODE 8011-01-P

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